Israel Knesset committee meets in first step to drafting Binary Options legislation

After several months of discussion, a meeting of Israel’s Knesset State Control Committee met yesterday to discuss the issue of unregulated binary options brokers operating from the country.

Israel outlawed the marketing or trading of binary options to its own residents earlier this year. However many unlicensed brokers remain based in the country which market to and take clients from abroad. But that may all change soon.

The parliamentary committee, headed by opposition party Yesh Atid MK Karin Elharar (pictured above), received testimony from a number of constituents including newspaper reporters who have been covering the issue, lawyers, former industry employees, former clients of binary options brokers, and Shmuel Hauser, the head of Israeli financial regulator Israel Securities Authority (ISA).

Mr. Hauser indicated that he has been working with Justice Ministry and Attorney General office officials on the draft of a new bill to be introduced to Israel’s Knesset, which will formally make it illegal to market binary options from Israel to foreign clients. The bill, however, is at closest several months away from becoming law.

Noticeably absent from the committee meeting were representatives of the Israel Police force, which was formally invited to participate but declined to attend. Israel’s police has come under scrutiny domestically  (and at the meeting) for not enforcing existing laws regarding fraud in dealing the unregulated binary options brokers.

It is still unclear if the handful of regulated binary options brokers (e.g. anyoption, Banc de Binary) which have operations in the country will be allowed to continue, or if they too will need to shut down their Israel-based operations. Structurally, these regulated brokers are based in the countries in which they are licensed (mainly Cyprus), with the marketing function often outsourced to a ‘third party’ company in Israel. That structure is likely to be outlawed as well.

Israel’s online trading industry has undergone a lot of change in the past year. Other than the aforementioned ban on binary options, Israel last year required any broker offering leveraged Forex or CFD trading to apply for a Forex Dealer license. To date, only six licenses have been granted, leading to consolidation with licensed brokers starting to buy up those who have not yet received one.

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