In the last year, the Israeli Securities Authority (ISA) has been reviewing license applications submitted for obtaining an online own-account financial trading license. As part of this licensing process, the ISA is intermittently issuing press releases clarifying various issues relating to the scope of the licensing legislation.
In one of such press releases issued recently, the ISA stated that it will not allow the offering of online binary options via the licensed trading medium. The reason for this decision is, according to the ISA, the nature of binary options which are complex and difficult to value, and the concern of the ISA that regulating such products might not be effective. The ISA goes further and claims that trading in binary options is akin to gambling, and therefore allowing such trading could harm the customers and disparage the reputation of the market.
Accordingly, the ISA requires all license applicants that included binary options products in the license application to remove such products from the application and to terminate their online binary options trading activity – otherwise their license application will be rejected.
There is no doubt that this development delivers a blow to the online binary options market in Israel, and requires all stakeholders involved in such market to evaluate their position and decide what will be their future actions. One such decision is whether to challenge this stance of the ISA in court – as the legislation in force does not refer in any form or manner to binary options, and one could argue, inter alia, that this decision of the ISA is outside the scope of its authority.
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