After many years of Israeli brokers operating freely without any regulations, in late 2014 the Israeli Parliament amended the local securities regime. Mandating that forex and CFDs firms must acquire a costly new licence and adhere to strict reporting rules, limiting maximum leverage and various other harsh legal requirements are all part of the new government demands.
Rumored to set their sights on an Israeli license are Plus500 and LMAX.
The new regulations coming into effect in June in Israel have sparked the interest of local and international companies alike. Up to fifteen brokers are said to be interested in receiving a license to operating in the country. There are already nine applications in process, aiming to reach the end of May deadline. Seven of those are consulted by Tal Itzhak Ron from Tal Ron, Drihem and Co. Law Firm.
A number of the applicants are highly established FCA regulated, ASIC regulated or CySec regulated brokers and liquidity providers, who wish to cater to Israeli clients and IB’s. Starting in June they would not have a legal option without the appropriate license. Some of the most interesting players rumored to set their sights on an Israeli license are Plus500 and LMAX Exchange.
The rest of the applicants are Israeli companies and players which had previously focused on the Israeli market, and will continue to do it under a new or an existing structure.
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While the regulations are about to take effect soon, some major issues remain unclear. One of the main concerns, explains Tal Itzhak, is that SOX compliance is left for interpretation whether it will apply to the whole group of companies of an applicant or only the Israeli operation.
Another critical issue that is still unanswered is whether or not these regulations apply to Israeli operations focusing on non-Israeli clients. The law itself cannot discriminate according to the location of end clients, though most believe that Israeli authorities are not interested in enforcing such regulations on operations that explicitly excludes Israeli clients.
Speaking with Finance Magnates, the head of the Israeli forex industry body, Itzik Noy, Chairman of Israel’s Trading Arenas Association, identified a number of potential market developments. Higher compliance costs will drive the industry to coalesce around five major brokers, all local representatives of international forex brands.
Some Israeli traders will turn to offshore brokers with higher leverage and less strict regulations, but the Trading Arenas Association head warns that his organization will act against brokers and IBs who accept Israeli clients without an appropriate local license.
This can lead to spreads rising for clients, but Noy thinks that’s a price Israeli traders should be willing to pay for higher safety standards.
Finance Magnates will continue to monitor these developments with additional details as they become available.