One year after the Israel Securities Authority banned trading in binary options for Israeli customers, the cabinet today approved, followed by the Ministerial Legislative Committee, the bill proposed by Minister of Finance Moshe Kahlon extending the ban to overseas customers.
No special difficulties are expected in the Knesset, and the bill will become effective within three months of its final approval on its second and third Knesset reading.
According to the bill, trading in binary options by Israeli concerns involving customers in Israel or overseas will constitute a predicate offense under the Prohibition of Money Laundering Law, due to the “criminal characteristics likely to accompany this industry,” as set out in the explanations accompanying the bill.
The Securities Authority explained that the initial decision taken a year ago resulted from the realization that trading in binary options essentially amounts to gambling, with all the negative characteristics and associations of gambling.
The Securities Authority said that there were additional reasons for extending the ban to overseas customers, including Israel’s image: “Various enforcement authorities, including the Securities Authority, recently received many severe complaints about many financial losses suffered by customers in various countries throughout the world as a result of activity in Israel trading floors operating with overseas investors, especially involving activity in binary options,” it was stated in the explanation.
“This phenomenon has assumed much larger proportions, and has generated a major negative worldwide impact, while significantly damaging Israel’s image in general, and that of the capital market in Israel in particular,” the Securities Authority wrote.
Securities Authority chairman Professor Shmuel Hauser commented, “Beyond the severe economic damage to people all over the world, the marketers of binary options are causing ever-increasing severe and destructive damage to Israel’s image, and are fanning the flames of anti-Semitism against Jews in general, and Israelis in particular.
For the first time, the bill will authorize the Securities Authority to take action against those parties currently operating from Israel with customers outside of Israel, while imposing severe civil and criminal sanctions, including prison terms.”
The Securities Authority formulated the bill, together with the Ministry of Finance, the Attorney General, and the Ministry of Justice Counseling and Legislation Department.
Binary options are regarded as one of the riskiest financial tools, used mostly by speculators and those looking for a quick profit.
According to the Securities Authority, at least, buying such an option other than for the purpose of hedging risks constitutes a risky gamble.
A binary option involves the direction of the change in trading of marketable assets, such as shares, commodities, or foreign currency, or on the sale price of assets.