The final panel of the Finance Magnates TLV Conference was an exciting, candid and provocative discussion about the state of the Israeli forex industry in light of recent regulations.
Zvi Gabai, the head of Securities and Financial Regulation Department at Barnea & Co and the former Head of Enforcement at the Israel Securities Authority (ISA) put his regulator hat back on and told us how the shock of Brexit will cause the regulators to think they are right not to let brokers continue to operate freely.
Mr. Gabai said: “This type of volatility makes them extra cautious. The regulator will tighten requirements to make sure brokers are stable to prevent systemic failure. They feel that their paranoia has been justified.
There are only a number of regulators, just tens of people, that have to monitor all the financial services firms and they don’t have the time to really go after unregulated firms – they need a lead, and when a foreign regulator, or a competitor, gives them a hint they act.
It’s a bad sign that no one challenged the ISA in court. An appeal had a real chance in my opinion. They should have approved or banned a specific instrument, not the whole binary options industry – this is not in their mandate.
There is a lot of paternalism, we need choice, we need democracy in the market, this is how you improve an industry. They just blocked an entire market.
If the industry can keep its head down and wait, in a few years, five years, this might be much better – as happened with funds managers regulation before.”
Learning from North Korea?
Tzah Druker, chairman of the ITAA, talked about how the Israeli regulator is very paternalistic and it remains to be seen if they decide they want to be like the regulators of North Korea.
Mr Druker said: “An Israeli client that will not work with an Israeli broker will not be able to be protected and this is what will happen because they will be driven outside the Israeli market. The lawmakers need to see what happened, this is not what they wanted – they wanted the Israeli clients to be protected. The ISA will find it difficult to explain why it blocks trading on Apple and Google and the Turkish lira.
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If the market will remain as unattractive as it is, due to the regulations, no companies will stay – everything will go offshore, this is a bad scenario. This is the money time – the coming weeks will decide if the industry survives or evaporates.”
Kobi Gur, the CEO of Leverate, said that the regulators focus on the regulated firms and overlook unregulated firms. This is light years behind the regulation in the European gaming industry. A full interview with Gur on the subject of regulations and more will be published tomorrow.
Nir Menashe of SpotOption Exchange said that binary options are deemed a financial instrument according to all the major regulators around the world: “You can learn how to trade better and this makes is different than gambling. People trade according to technical analysis and knowledge about the economy – this is finance, regardless of the time frame.
Transparency will protect traders and we have added as many transparent aspects as possible. About marketing tactics, it is very easy for the regulators to monitor everything, they can listen to all the calls and tell them on the spot to change this behavior, and they can do it.
They Israeli regulator could have made a great regulations or simply take from the best practices around the world – sadly this did not happen and it left a sour feeling.”
Opportunistic Witch Hunt
David Melitz (of David Malitz PR) said there is a witch hunt against the industry in the Israeli media:
“The Israeli media lost trust in the industry, we need to regain their trust and explain that there are good firms that are regulated. We need transparency to show the newspapers that regulated firms are not like the scams. We have to make sure media people understand that forex is not gambling – we need them to understand this.
I don’t think the ISA will encourage trading arenas after the regulatory process will end. It’s enough to look at the head of the Israeli stock market – a binary options pioneer – to understand that they want to take the volumes out of these companies and bring them into the stock exchange.
Opportunistic lawyers are rising dirt against brokers, besmirching their name without cause and no one is enforcing brokers’ rights. We saw a chairman that wants to be reelected to his position. And forex was an easy target to make a lot of headlines.”
The winner of the fintech awards was Bubbles. Michael Greenberg presented the award.