Is Israel Burning Its Fingers By Fighting Binary Options Industry?

The once thriving binary options industry in Israel is under attack by the government. The Israel Securities Authority (ISA) has accused binary options firms of running a scam that is causing untold losses to unsuspecting traders. By scamming their clients, the ISA has further accused binary options firms of painting Israel’s global reputation.

To protect investors and preserve Israel’s reputation, the ISA has declared war on binary options industry. The agency has banned marketing activities of binary options products within the country and is seeking a review of the securities law to allow it bar binary options providers based in Israel from marketing to overseas clients.

But it turns out binary options industry that the ISA is determined to undo is a source of substantial tax for the government. A recent survey showed that this year alone securities and derivatives industry contributed $2 billion in corporate taxes, or 0.7% of the GDP, with binary options industry being the largest contributor. Binary options accounted for $1.25 billion or 63% of securities and derivatives tax.

If that is the case, then it Israel’s corporate tax could drop by more than $1 billion if ISA succeeds in killing binary options industry.

A major employer

Besides the direct taxes it pays to the government, binary options industry has also created employment for thousands of people in Israel. More than 4,000 people work in Israel’s binary options industry as marketers and other administrative positions. The binary options industry in Israel is structured in two levels: trading platform providers and trading technology providers.

Trading platform providers are the brokers that offer products to be traded and charge for facilitating the trades. Some of the brokers also offer leverages to their clients as a way of helping traders to maximize their profits.

Whether brokers or system providers, binary options industry has employed many people in Israel, raising the question of whether stifling the industry could amount to economic sabotage. Salaries in Israel binary options industry range from $3,500 to $15,000 a year on the average.

Israel may not be getting the benefits

While binary options industry is a major employer and tax contributor, the Israeli government seems to be the reason that the industry is causing the country more harm than benefits. The ISA’s chairman Shmuel Hauser has likened binary options firms to destroyers because they deceive their clients into trades that are like gambling, causing them to lose their hard-earned investments. The regulator also seems worried that as Israeli binary options firms scam overseas clients, they are giving the country a bad name and making it difficult for genuine Israeli companies to compete abroad.

While the ISA is set to have the securities law amended to allow it prohibit binary options firms in the country from marketing or selling their products to overseas customers, the agency is collaborating with financial securities regulators in other countries to make it difficult for Israeli binary options firms to target offshore clients.

The ground is rapidly shifting to providers of retail binary options products because regulators in Europe have also stepped up their crackdown on the industry amid allegation of widespread investors complaints. Card payments processors like Visa and MasterCard have also joined the war against binary options firms by denying unregulated binary options firms access to customer deposit through their networks.