Israeli regulators maintain an aggressive attitude against online retail trading, always looking for new ways to curtail the market. After targeting forex and algo trading, the Israeli Securities Authority (ISA) is now planning to limit access to binary options and single stock CFDs.
The ISA is reportedly planning to restrict access to binary options except for “sophisticated investors,” thus making it out of reach for the vast majority of Israeli traders. The ISA regulations on Trading Arenas (as it refers to online brokers) define a sophisticated investor as a client that has consented in advance that he is one, has a net financial worth of over NIS 12 million ($3.1 million) and trades over NIS 10 million ($2.6 million) a month.
According to the Israeli business newspaper Globes, a source from the ISA said that the reason for the move is that the regulators see binary options trading as purely “a guessing game, and that’s not the purpose of the trading arenas.”
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In addition to the limitations on binary options trading, the ISA is also reportedly planning to ban any trading on stocks that have not presented a prospectus to investors in Israel. This will in effect make most popular single stock CFDs no longer legal in Israel.
Earlier this year the watchdog has issued a warning to the Israeli public about the practice of algo trading which it called “automated portfolio management“. The ISA said this was done against a background of an increase in the number of queries from the public, including “those who consider themselves victims.”
Speaking with Finance Magnates about the recent news, lawyer Tal Itzhak Ron, which represents many of the Israeli firms in their dealings with the regulators, said that limiting binary options is not expected to be as critical an issue as classifying algo trading as portfolio management.
Ron says that binary options trading is a small part of the offering for most firms that applied for the Israeli license. “Unlike other parts of the world, restricting binary options trading won’t substantially hurt Israeli firm. We are much more concerned with the status of algo trading as that is a popular tool and I expect we will see the matter reaches the courts as brokers will appeal the ISA’s regulations.”