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Israel's Binary Options Ban - the Collateral Damage

by Guest Contributors
  • An in-depth read of amendment 66, approved by the Israeli parliament on Tuesday, is advised for FX and CFD providers.
Israel's Binary Options Ban - the Collateral Damage
FM, Israeli Knesset debating changes for binary options and forex operators
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This article was written by David Woliner, Head of Financial Regulation at Porat & Co. Law Firm.

On the evening of October 23rd, 2017, amendment 66 to the Israeli Securities Law was passed into law by the Israeli Parliament. All those affected by the law now have approximately 3 months to comply (formally - 3 months starting the day the law is published in the government official publication), which for most of those involved in the binary options industry means closing down their business.

This is far from being a surprise. All industry players who followed regulatory news in Israel over the past year or so have felt the ground shaking beneath their feet. Their fears have now materialized, as this amendment means the de facto shut down of the binary options industry in Israel.

David Woliner

So, how far reaching is the amendment? It suffices to quote the law itself to understand that it encompasses all core activities linked to binary options. The amendment introduces the term "managing a trading platform" (which offers binary options, that is) as follows:

  1. Formulating the strategic decisions of the Trading Platform ;
  2. Operating the trading platform, including through operating the computerized system in which the trading platform operates, pricing of the financial instruments, clearing of financial instruments and clients' funds, and operating customer or marketing centers, either phone based or internet based, whether directly or through the use of a service provider.

Shut down or relocate

In practice, all of the above means that:

FX and CFD providers beware

It remains to be seen how the amendment will be enforced, and how much flexibility the Israeli Securities Authority (ISA) will show when industry players, especially technology and platform solutions providers, seek relief or exemption from the ISA by trying to establish that their services do not amount to operating a trading platform but rather are in the permitted realm of software development.

One needs to remember that the ISA's original amendment proposal was to be applied on the providers of forex and CFDs products. Eventually, the amendment will apply only to binary options, but the amendment grants the finance minister the power to add other financial instruments to the ban, pending approval by the Israeli parliament. FX and CFD providers need to stay alert.

This article was written by David Woliner, Head of Financial Regulation at Porat & Co. Law Firm.

On the evening of October 23rd, 2017, amendment 66 to the Israeli Securities Law was passed into law by the Israeli Parliament. All those affected by the law now have approximately 3 months to comply (formally - 3 months starting the day the law is published in the government official publication), which for most of those involved in the binary options industry means closing down their business.

This is far from being a surprise. All industry players who followed regulatory news in Israel over the past year or so have felt the ground shaking beneath their feet. Their fears have now materialized, as this amendment means the de facto shut down of the binary options industry in Israel.

David Woliner

So, how far reaching is the amendment? It suffices to quote the law itself to understand that it encompasses all core activities linked to binary options. The amendment introduces the term "managing a trading platform" (which offers binary options, that is) as follows:

  1. Formulating the strategic decisions of the Trading Platform ;
  2. Operating the trading platform, including through operating the computerized system in which the trading platform operates, pricing of the financial instruments, clearing of financial instruments and clients' funds, and operating customer or marketing centers, either phone based or internet based, whether directly or through the use of a service provider.

Shut down or relocate

In practice, all of the above means that:

FX and CFD providers beware

It remains to be seen how the amendment will be enforced, and how much flexibility the Israeli Securities Authority (ISA) will show when industry players, especially technology and platform solutions providers, seek relief or exemption from the ISA by trying to establish that their services do not amount to operating a trading platform but rather are in the permitted realm of software development.

One needs to remember that the ISA's original amendment proposal was to be applied on the providers of forex and CFDs products. Eventually, the amendment will apply only to binary options, but the amendment grants the finance minister the power to add other financial instruments to the ban, pending approval by the Israeli parliament. FX and CFD providers need to stay alert.

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