Why is the Binary Options Industry not Fighting Back?

David Malits gives his take on the binary options crisis in Israel.

The binary options and forex industries in Israel might suffer a death blow due to the major brands preferring to avoid a fight and relocate their base of operations, thereby increasing and perpetuating the problems. The problems will not disappear in Moldova. The blows will come even to those who switch to CFD or Lotto. They need to fight.


This past year will be remembered as the year that made binary options the pariah of the financial industry, the year that transformed a flourishing sector responsible for generating vast amounts of revenue into a synonym for financial crime. This despite the fact that binary options are a legitimate financial tool listed on major and various stock markets worldwide.

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David Malits

If that were not enough, the tendency of the media and regulation, which walk hand in hand, is to unjustly categorize an entire industry as illegitimate and transform tremendous financial industries into a synonym for fraud. We recently heard that the Israeli regulator is doing everything it can to impose difficulties on companies in the sector as foreign currency arenas, brokers for contracts for difference, companies that specialize in algorithm trading and now binary options.

Many people find themselves unable to earn a living

Despite the aforementioned issues, the main difficulty faced by the financial industry is not the regulator but its coping mechanism, which is non-existent. Israel is undoubtedly a powerhouse in the fintech sector, and subsequently in financial technology. While the outdated, archaic Israeli regulator tries to divert media attention from the Israeli stock exchange by choosing a scapegoat, financial industry leaders who are necessarily known for their pioneering thinking and ventures remain stunned and without a proper response.

Based on personal familiarity, those business leaders who control these vast industries each have a fascinating biography. As with any life story that makes you into who you are, their story has weaknesses. They revert to being 16-year-old youths endlessly scolded by their teachers. Those youths who instead of solving their problem, try to bypass or avoid it. Why should their behavior change now? Perhaps the time has come to take action…

Binary options is not gambling

The Israeli regulator established a dangerous precedent in a country in which events in the industry might trickle down and occur in other countries. At a certain stage, the financial instrument was defined by the regulator as a tool with elements of gambling. This allegation that was introduced within the confines of a lawsuit filed against a company in the industry was rejected along with the claim by the court but no one remembers this part.

It turns out that media statements have enormous resonance, and when the Securities Authority saw that there was no response on the part of the companies involved in the sector, banned the trading of binary options in Israel even for brands that passed regulation. An absurd situation in which an objective financial instrument is disqualified.

Much can be written about the subject, about stock markets around the world that anchor binary option trading, use of the financial instrument for hedging purposes and the advantages of conducting transactions in which the value of a certain asset can be expected to rise at a certain point of time but not the amount of the increase.

it is not possible to prohibit an entire sector from existing overseas

We can, of course, write about the previous general manager of the Israeli Stock Exchange and his direct relationship with the binary options and algorithm trade industry in the US. The same GM of the Stock Exchange that earned the support of the head of the current head of the Securities Authority – Prof. Shmuel Hauser.

One can speculate about the nature of the moves adopted in Israel and ask whether they constitute something beyond ‘a desire to protect citizens’ and perhaps ostensibly an attempt to take control of a tremendously profitable financial instrument and introduce it into a stock exchange controlled by banks, thereby ostensibly eliminating any competition.

Excuses and actions are two separate things. The brands allowed the discourse to take place, did not sue for slander when a lawsuit was demanded, did not activate lobbyists in an organized manner and did not demand justice. The other side realized that public-media opinion is suitable and was even perhaps surprised by the lack of response. The discourse became inflamed and the concept of binary options became synonymous with white-collar crime that occurred under the unresponsive eyes of the brands.

Lone wolves

Industry leaders work alone or in small groups. Each individual and group loyal to its own. It makes no difference if these are the circumstances of their life that led them to become sultans or whether it was the nature of the work in the industry. The bottom line is that few forming companies, if any, create joint moves to maintain it.

I believe that this work was not known to the leadership of the Israeli regulator and caught him by surprise. I believe that they expected a battle and when that failed to occur, escalated their moves, since how could it be that an industry that generates billions would not fight. The expectation was for a consolidation of forces, at least among the large companies, at least by the creators of the platforms and technology – work on public relations and lobbying in an organized manner, organized and unified defense against slander, restoring poor reputation that has long been indexed on the internet, etc.

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The expectation of companies of this size was that they would not agree to suffer these types of blows but rather unify and use their joint capital for defense and attack if necessary. To this day, nothing was done.

I am not fooling myself or you. It is not always possible to achieve absolute results but it is possible to delay, suspend, torpedo moves that are destructive to an industry and forge interim solutions. Today, it appears that no one is fighting.

Does the legislation pass the HCJ test?

Before the regulator acted against companies that operated out of Israel to provide services to brands located overseas, it acted against companies that operated in Israel. This is ostensibly logical other than the fact that the regulator disqualified an entire financial sector and as previously mentioned prohibited the sale of binary options to brands that passed regulation in Israel to the Israeli public.

Recently, employees were even informed of the law that would make binary options as well as other financial instruments securities, a security that can be traded only through…the stock exchange. This sounds, superficially, like a death blow to the sector in Israel, but it also let the cat out of the bag – the desire to control all instruments under the auspices of the Israeli stock exchange.

Just as it is not possible to prohibit the sale of a legitimate financial instrument, it is not possible to prohibit an entire sector from existing overseas. Here, too, the expectation is that the companies will rear up and fight, but as Hauser already learned, the mindset of the captains of industry runs opposite to expectations. The latter prefer to relocate and operate out of a small European country rather than insist on their rights.

The trouble with this option is the fact that it creates a precedent, serving as an example that may be repeated anywhere around the world.

The large ones accept and pay

I do not know the magnitude of the negativity described and I am not in a position to judge. I know for a certainty that the large brands cannot afford, if only in terms of interests, to conduct themselves in the manner occasionally depicted in the media.

The main victims are necessarily the large organizations

Small call centers, wild companies, etc. do what they do and ultimately, the large companies that operate in a legitimate manner, with risk management and in an organized manner, are forced to pay the price. The main victims are necessarily the large organizations, the ones that cannot change their brand names overnight, since they have built up a reputation over time. Companies that employ hundreds of people and cannot immediately transfer their operation to another country.

In this channel as well, there is no unity. Activity is sporadic and giant companies pay a tremendous price. Many people find themselves unable to earn a living, with vast logistical centers forced to relocate from country to country.

Mindset to run

Based on personal conversations with several of the leading figures in industry, I was exposed to amazing life stories. One of the motifs that repeated itself was a childhood event that resulted in an exceptional way of thinking that crossed all borders. Occasionally this event was a trauma and occasionally a positive experience but all shared an attempt to resolve the problem in an extremely certain manner.

It appears that this way of thinking characterizes the actions of the leaders of industry in other areas of life as well. They prefer moving countries, relocating giant companies and occasionally abandoning everything, and relying on their skills to find another way of earning a living rather than fighting.

They forget that they are not 16 years old and can make life extremely difficult for those fighting them and even win. They ignore the fact that change can be effected and that in the next sector, they will be required to provide explanations one day.

This article was written by David Malits, owner of STRIX, a reputation management and crisis communications firm.


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