Israel the undisputed capital of Binary Options is one step closer to an all-out ban of the product. This is not only a ban on binary options being offered to Israeli citizens but also a ban on offering binary options trading anywhere in the world.
This move is unprecedented and highly unusual in that legal and regulatory authority is usually limited to the citizens of that country. Now the Israeli government will look to make it illegal for any company to offer binary options ban anywhere which in effect will shut down one of the fastest growing industries in Israel. The binary options ban is a complete repudiation of the industry in Israel because of years of fraud and deceit.
Is it Gaming or Financial Services?
Israeli brokers looked at binary options as a gaming product and not a financial derivative. Even the brokers that eventually became regulated were never concerned about customer suitability or performing proper AML checks. All the focus was on getting the client to fund at any cost and any violations or complaints would result in a fine or some sanctions. Most brokers were more than happy to pay these fines and continue to violate because profits were just too good. Binary Options brokers would view the products they offered in terms of “entertainment value” but presenting them to the public as real investments.
Israeli brokers offered their employees compensation packages that were heavily weighted on the client keeping their money and even more so were based on the client losing money through a P&L share. Either the broker or the broker and a software provider would split the profit and loss of the customers. This meant that the broker may only receive compensation if the customer keeps his money which means no withdrawals. If the clients withdrew his money that might mean that the sales person would not get paid. In many cases, a sales person would completely fabricate their location and qualifications they might have.
Throw Away Brands
What about a company’s reputation if they are doing all these things? In many cases, these brokers were offshore companies that acted as holding companies of the “brand”. To the broker, the brand was just a website and as soon as the situation got too toxic the broker would just abandon the brand and start new with the same staff. For these brokers, it was easier to create a new identity in hopes the public couldn’t keep up.
2017 will bring many changes to the binary options industry. Stricter regulations will mean that it is likely many brokers will move completely off shore. Offshore, brokers are finding it very difficult to access banking and merchant services. The public is also getting more informed and aware of the bad brokers. Let’s hope that the binary options ban will make sure we don’t see anything like the binary options brokers of Israel again.