Israel Securities Authority bans binary options

trading

A letter provided to “Globes” shows the agency believes the unregulated market is akin to gambling.

Nearly five months after “Globes” revealed the Israel Securities Authority (ISA) - led by Prof. Shmuel Hauser - planned to introduce significant restrictions on the dealing of binary options on trading platforms, sources inform "Globes" that the ISA has decided to completely halt binary option trading in Israel.

Trading platforms in Israel will be barred from marketing such services to their clients because the ISA considers the phenomenon akin to gambling and not as intelligent investment management.

In a letter that has reached “Globes”, the ISA explains its decision “not to permit companies licensed to operate trading platforma to offer binary options to their clients, as the complexity of options and the difficulty in their pricing, and the absence of mass trading which creates a market price, do not allow the ISA to approve trading on such a platform for retail clients.”

The ISA added: “Because of the characteristics of the tool and the platform, the service is similar to a gambling game. It is the opinion of the ISA the continuing trading of binary options in regulated platforms could hurt not only the clients on the platforms but the reputation of the market as a whole.”

Trading platform allow customers to buy and sell a variety of financial instruments and products, including currencies and shares. The platforms consist of online trading software which investors can use to buy and sell financial instruments at a constantly-updating price.

Currently, the trading platforms are in the process of registering with the ISA - when the process is completed, they will be regulated for the first time. The present decision by the ISA was undertaken during the registration process, as part of a number of decisions the ISA is taking, including restrictions on trading foreign securities offered without an Israeli prospectus.

A binary option is an investment instrument heavy on risk and reward. The option offers a predetermined payout conditional on a financial instrument’s performance - whether a currency, an index, or a stock. If it fails to attain the condition, the initial investment is lost.

There is a lack of substantive data on the binary options market - no verified figures are available for the number of clients or the amount of the public's funds diverted to this market. There are also no restrictions on the aggressive marketing of the instrument and the platforms to the public, which is ignorant of the underlying risks.

Published by Globes [online], Israel business news - www.globes-online.com - on March 22, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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