Investors in Israel's high-tech sector have reacted with relief to a new ban on trading binary options to foreign clients that the government approved yesterday (June 18). The ban still has to be voted on in the Knesset, Israel's parliament, and will then join the one that was approved last year on marketing such products to domestic customers.
"These people have been a plague on Israel's reputation," said one high-tech investor who asked to remain anonymous in order not to be associated with the binary options issue.
The trade in binary options has been linked with large-scale fraud, to the degree that the FBI in March issued a warning to investors. Apple earlier this year took steps to ban apps that offer the trade from its App Store. Many binary options firms that international clients have complained about are based in Israel, investigations by The Times of Israel and Reuters have shown.
The head of the Israel Securities Authority, Shmuel Hauser, acknowledged Israel's position in the often questionable trade in a comment on the ban: "Beyond the severe economic harm to citizens around the world, marketers of binary options are increasingly causing reputational damage and inflaming anti-Semitism towards Jews and Israelis."
As the country's chief regulator, Hauser recently likened the damage done by binary options to that inflicted by "blood diamonds".
One investor said that the ban was overdue but that at least, "It shows there's a sheriff awake in the Israeli compliance and regulations field."
Binary options are a win-or-lose, hence binary, bet on the movement of a stock, commodity or, often, a currency. Investors can put money on whether the asset will move up or down over a certain period, whether weeks or minutes. The latter especially, has been likened by regulators in several countries to gambling. If the stock or currency moves down, the investors lose all their money.