Israel clamps down further on binary options providers

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Israel is further cracking down on binary options providers, after the Israeli Ministry of Finance published a draft amendment that would allow it to sanction companies offering the controversial financial products outside Israel.

The move would unsettle the country’s growing online trading industry, but appease citizen groups outraged by alleged frauds carried out by binary options companies selling the trades overseas.

Binary options trades, which are often unregulated, are bets on the movements of financial markets: correctly predicting the up/down outcome wins the customer a fixed profit, but getting it wrong will see them lose the whole stake.

The high risk binary options are banned in several countries, including the US. Israel’s move is part of an international movement to clamp down on the practice, with countries including Cyprus, once considered a soft-touch regulator, proposing reforms.

The Israel Securities Authority (ISA) already bans the sale of binary options products to Israeli citizens. A spokesperson explained: “It is the ISA’s position that trading in binary options, such as the binary options that license applicants wanted to offer in Israel, is similar in nature to gambling.”

However, under current laws Israel-based companies may offer binary options to overseas clients.

“In most cases, these customers lose their investments,” said the ISA’s spokesperson. “Current legislation does not allow the ISA to take action against such trading platforms or against criminal elements that operate such trading platforms.”

The Israeli Ministry of Finance yesterday published a draft amendment to the Securities Law governing the sale of binary options, a spokesperson for the ISA told the Financial Times.

The amendment would give the ISA power to take action against companies selling binary options to clients outside Israel, and was drafted by the Attorney General, Ministry of Justice and ISA.

The Times of Israel estimates that over 100 binary options companies operate in Israel.

One of the best known Isarel-based providers was Banc de Binary, a controversial global online trading platform which last month renounced its Cypriot trading licence after incurring a string of regulatory penalties.

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