Do not invest more money than you can afford to lose.
Israel’s financial markets regulator, the Israel Securities Authority (ISA), has received the grudges from other European regulators in relation to its policies regarding binary options, Israeli online media Times of Israel reported over the weekend. Peers are ‘concerned’ that the ISA is allowing fraudulent activities in the industry.
The European regulators even demands the binary options industry across Europe, in Israel included, should be shut down.
At a meeting of 27 European countries, part of the European Regional Committee meeting of IOSCO, the regulators seeked an explanation from ISA chairman Shmuel Hauser regarding the reasons fraudulent activities in the binary option industry are allowed and demanded to know what the Israeli regulator was doing to tackle the issue.
This has not been the first time European authorities seek to influence the regulation of binary options in Israel. However, so far no certain actions have been taken by the ISA. The only step the Israeli regulator has taken recently to reduce fraudulent activities was to ban the provision of binary options trading services to local citizens. However, Israeli brokers are free to operate outside of the country, which is why European authorities are not happy. Recently, however, the Israeli regulator announces it considering the ban on advertising of binaries to retail clients abroad, which would mean that major brokers will not be able to operate locally-based call centers.
Hauser explained the ISA is preparing legislation amendments to address the issue of fraudulent activities in the country. It is drafting a legislation which would expand its authority and enable it to shut down entities that solicit customers abroad, as currently its authority is limited to the country’s borders.
About 90% of clients of Israeli binary option brokers lose their investments and brokers often times use fraudulent tactics to get them to invest funds, according to data cited by Times of Israel. “Thousands of Israelis work in the field, which is estimated to have fleeced billions of dollars from victims all over the world in the past decade” the media noted.
In binary options trading, investors guess whether the price of a certain instrument would go upwards or downwards within a pre-determined time frame. Once the time is up, the option is deemed expired and the bet is settled. Depending on the outcome, a trader either collects a profit, or loses money.
This type of instrument, however, is very controversial and often attacked by regulators due to its risky nature. In the forex world, binary options are the closest to gambling.
In August last year, Belgium banned the distribution via online channels of over-the-counter (OTC) binary options, spot forex, and CFDs with leverage. France has also banned the online advertising of “highly speculative and risky financial contracts”, such as binary options, forex and CFDs with a leverage greater than 1:5. In addition, the Netherlands and Germany have also announced they consider the ban on the advertising of such instruments.
In the US, trading in such instruments is restricted to on-exchange execution only (via Nadex or Cantor Exchanges). Meanwhile, Quebec’s Autorite des Marches Financiers (AMF) recently proposed the prohibition of the sale of binary options to citizens in the province, becoming the first Canadian province to consider a full ban on this type of instruments.
