About a year and a half ago a new regulatory regime regulating trading rings entered into force, requiring the operators of trading rings to obtain a regulatory license as a pre-condition to operating them, and prohibiting the operation of a trading ring without such a license. As part of this regulatory regime, the Securities Authority – which is the regulator of the trading rings – reached a decision not to approve trading in binary options in trading rings due to the characteristics of the binary options and the trading rings.
The Securities Authority holds the position, as outlined in a formal paper dated March 1, 2015, that a trading ring that is solely interacting with clients from outside Israel and does not allow Israeli clients to access the trading ring, is not subject to this regulatory regime, even if managed from Israel, partially or exclusively. According to this stance, the operation of a trading ring for binary options, where all of the clients are outside Israel, is not regulated.
In order to expand the prohibition imposed by the Securities Authority on binary options, to offering such options to clients outside Israel, the chairman of the Securities Authority, Prof. Shmuel Hauser, approached the Attorney General, with a request to amend the legislation in force and to authorize the Securities Authority to ban the marketing of binary options to clients outside Israel. That is, the Securities Authority is seeking to broaden its powers to activities which do not involve Israeli clients, solely because the marketing efforts relating to these activities are performed from within Israel.
It seems that this approach of the chairman of the Securities Authority needs to be considered in light of a regulatory effort, that manifests itself in other jurisdictions across the world, including the likes of the Netherlands, Belgium and France, to significantly reduce trading in binary options; whether due to the manner in which these are classified by regulators or due to various claims as to the manner in which the trading in binary options is conducted and the marketing efforts associated with them.
It is difficult to provide an analysis of how this will unfold, but there is no doubt that this stance of the Securities Authority, as well as the trend of the regulatory treatment of binary options in various jurisdictions across the world, does not bode well for the stakeholders of the binary options industry.