The latest draft of the legislation banning Israeli binary options marketing has just been unanimously approved by the Knesset Reforms Committee, making it almost certain to be accepted into law as is. The approved version of the ban will require Israel-based binary options technology providers to either completely change their business model or cease operations in the country.
According to the latest changes, the definition of managing an international binary options brokerage (which will be outlawed) is expanded to cover many of the functions that the technology providers currently offer their clients. These include operating the computer systems of the brokerage, the pricing and clearing of the binary options, clearing of client funds, operating marketing or service centers whether on the phone (call centers) or online, all whether directly or through a service provider.
Finance Magnates was at the Knesset Reforms Committee today and observed the discussion.
The Israel Securities Authority (ISA) said: “Our position is that binary options are like gambling. This is the position and therefore there should be no exceptions or changes. We don’t want this to be managed from Israel. Developing and selling software is OK. In practice there is no separation between the technology companies and the brokers.”
The Israeli police commented: “We are taking steps with Google, Apple, Facebook and the credit card companies. This started with players transferring from online gambling to binary options. The problem is that the technology companies merge into the brokers, they sell the software, the clearing, everything. You can literally pick up the phone and change the outcome of the trade.”
The Justice Department said: “The way we see it, software companies that develop the trading platforms are actually a partner of the brokers. Whoever supplies a platform for fraudulent companies is an accomplice to their crimes. Whoever is committing an offence which is partly done in Israel, is committing an offence. Gambling is very similar. This is why the ban is nothing new for Israeli law. The mere sale of a product that has elements of fraud is an offence.”
Binary Options – In, Forex and CFD – Out
It important to note that the international marketing ban will only target binary options trading and not forex or CFD trading. Assuming it doesn’t change by the final approval, this will force technology providers to refocus on non-binary options-related technologies if they wish to remain in Israel.
The proposed ban has already apparently forced technology providers to change their business practices in fear of it. SpotOption refocused on CFDs and cut staff in Israel, while TechFinancials (LON:TECH) recently confirmed that it is downsizing in Israel.