Israeli Watchdog to Limit Access to Binary Options Trading

Israeli regulators maintain an aggressive attitude against online retail trading, always looking for new ways to curtail the market. After targeting Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term and Algo Trading Algo Trading Algo trading, sometimes referred to as algo, may be defined as computerized trading that employs proprietary algorithms or pre-programmed commands that are tailored to take into consideration variables like price, volume, and timing. First introduced in American financial markets in the 1970s, algo-trading is generally utilized in trading scenarios such as arbitrage, trend trading strategies, and order execution. Approximately 60% of all trades were executed by computers in 2010. Today, algo tra Algo trading, sometimes referred to as algo, may be defined as computerized trading that employs proprietary algorithms or pre-programmed commands that are tailored to take into consideration variables like price, volume, and timing. First introduced in American financial markets in the 1970s, algo-trading is generally utilized in trading scenarios such as arbitrage, trend trading strategies, and order execution. Approximately 60% of all trades were executed by computers in 2010. Today, algo tra Read this Term, 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."

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.”