The Israeli Securities Authority (ISA) officially announced today that it has decided not to approve trading on binary options for companies wishing to be regulated in Israel. The ISA says that the complexity of binary options and the difficulty in pricing them as well as the lack of multi-party trading that enables the creation of a market price, all led to the decision not to approve binary options for trading arenas (as the law refers to brokers).
Taming the Jungle
The ISA adds that any company that included offering binary options trading in its request for an Israeli license will get its license rejected, unless it reports to the ISA within 30 days that it has ended all binary options operations, except for withdrawals, account closures and closing positions.
Prof. Shmuel Hauser, Chairman of the ISA, gave an interesting and colorful speech at a conference in Tel Aviv this morning, saying that the ISA views its role as helping consumers navigate a “dangerous jungle” of investments. Among other things, he said that there are many investment opportunities that disguise themselves as harmless while being sharp-toothed predators on the hunt for innocent investors.
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“This is a jungle of unregulated investment opportunities. The operators of the jungle think that the jungle has a law of its own. Well they are wrong. In the state of Israel there is one law and that law applies to everyone. Whoever didn’t understand that so far will understand it soon. We are going to bring order to the jungle.”
As was leaked yesterday, the ISA writes today that “due to their characteristics the service is essentially similar to gambling games. The ISA thinks that continued binary options activity will hurt not just all clients (including sophisticated investors) but the reputation of the entire market.”
Today’s move is very harsh but has not come totally out of the blue. The Israeli regulators have been taking a very hard stand on certain aspects of online trading that they do not approve of, such as binary options and algo trading. An example of brokers getting ready for this might be seen in Israeli binary option provider iTrader’s decision to launch a new forex venture under the same brand, called iTraderFX.