During a conference in Tel Aviv regarding forex and binary industry, everyone was under the impression of BREXIT. As Israel recently banned binary options, some participants expressed their concern, as they don’t think of ban as of solution, but as an act of ignorance.
For example, Zvi Gabai, who worked as Head of Enforcement at the ISA, stated that situations like BREXIT show how unstable an entire industry or market can be as extreme volatility occurred. Strict regulation is demotivating for business, and a number of employees in the regulation sector are not sufficient for proper industry supervision.
He explained that they act only when someone warns them about bad practices – either a competitor or other regulatory bodies.
“They should have approved or banned a specific instrument, not the whole binary options industry – this is not in their mandate. We need democracy in the market, this is how you improve an industry. They just blocked an entire market.”
Binary Options in Israel or North Korea?
That Druker went even one step further in his criticism. The ITAA chairman compared Israeli regulators with regulators in North Korea, as they are both overprotective, not objective and stricter than they should be.
He explained that thanks to this type of regulation, Israeli traders will take their money elsewhere, but won’t be protected as they would be in Israel. He believes that it is in the interest of Israeli authorities that Israeli citizens are always protected, and that can’t be achieved by closing eyes and banning services. He also noted that sooner or later someone will ask why the trading is really banned, especially when it comes to big brands:
“If the market will remain as unattractive as it is, due to the regulations, no companies will stay – everything will go offshore, this is a bad scenario. This is the money time – the coming weeks will decide if the industry survives or evaporates.”
Trading vs. Gambling
Some participants noted that Israeli regulation is running behind EU regulatory framework. If we know that CySEC frequently receives criticism and is sometimes judged as not active enough, it can only be presumed how ISA works.
Nir Menashe from SpotOption said that binary options are not gambling, and can be learned just like any other type of trading. It is more than a mere guess, so there is no need to ban it:
“People trade according to technical analysis and knowledge about the economy – this is finance, regardless of the time frame.”
Such regulation of binary options is not only unmotivating for brokers but also increases the chance that trader will deposit with a scam broker. Even if the regulated status is not a 100% guarantee that the broker is respectable, it is some sort of protection, as a trader has the regulator behind his back.
Transparent market benefits everyone – traders, brokers, and regulatory officials. Also, nowadays most regulatory bodies cooperate in investigations, arrests and prosecutions of foul brokers which leave Israel as an island with unprotected traders and suspicious intentions.
Binary Options Lynch in Israeli Media
Israeli media is not missing a single opportunity to warn citizens about dangers of binary options. And while there are definitely some scams in the binary options industry it is not ethical or professional to do a witch hunt. Treating all brokers as scams is bad for the economy, but also for general public as they never receive objective information.
David Malitz, a PR agent, explained how this situation is a result of misunderstanding what financial products like forex and binary options really are:
“I don’t think the ISA will encourage trading arenas after the regulatory process will end. It’s enough to look at the head of the Israeli stock market – a binary options pioneer – to understand that they want to take the volumes out of these companies and bring them into the stock exchange.”
The main reason why Israeli media is so unfriendly towards binary options and forex industry is because of scandal when Tal Yaron Eldar, former commissioner of Income Tax Authority turned out to be the founder of binary broker eTrader. The popularity of alternative types of investing, such as binary options, lead to the collapse of Tel Aviv Stock Exchange. Some believe that she purposely created such environment in order to attract more traders to her platform.
Media can easily create an environment that reminds of a witch hunt but is much harder to convince people that some product is still reliable and safe to use. This is a perfect example of hysteria created by modern media, as it doesn’t help anyone. Traders are scared to trade, or, as they have other opportunities, trade with whatever broker comes in handy which is not always the best solution. Instead of having a regulated market that will improve the economy, and the relationship between broker and trader, Israel decided to go the other way, and support an unfriendly investing environment. At the moment of writing this article, ISA didn’t react to these statements.