The Israeli Ministry of Finance has published a Memorandum of Law calling for the prohibition of Israeli trading platforms from offering binary options to overseas investors.

The finance ministry published its memo in conjunction with the Israel Securities Authority (ISA), the Ministry of Justice and the Attorney General. It purports to amend the Securities Law, prohibiting Israeli trading platforms from offering binary options to overseas investors.

The memo also calls for an end to the operations of any trading platform that is located in Israel and caters exclusively to overseas clients if it operates without a trading platform license issued by the country of its clients — even if that platform does not offer binary options.

Approximately one year ago, the ISA prohibited trading platforms that trade with Israeli clients from offering trades in binary options. It is the ISA’s position that trading in binary options is akin to gambling.

Nonetheless, in the current legal situation, trading platforms that operate in Israel exclusively for overseas clients can still trade in various financial instruments, including binary options, without being subject to any regulation or oversight.

In the past year, many clients have complained to various Israeli law enforcement agencies, including the ISA, that they have sustained heavy financial losses in various countries around the world as a result of trading activities, especially trading in binary options, by Israeli trading platforms that trade with their overseas clients without being restricted by any regulation or licensing requirements. This, according to the regulator, has damaged Israel's image and must now end.

The memorandum extends the ISA’s enforcement powers to include the activities of trading platforms managed in Israel that cater exclusively to clients outside Israel. It writes: "The memorandum prohibits such platforms from offering their overseas clients to trade in binary options, and prohibits platforms managed in Israel from operating vis a vis overseas clients without an appropriate foreign license. The Memorandum does not permit trading platforms to operate vis a vis clients from countries in which trading platform managers are not subject to any regulation.

Entities who violate the prohibitions set forth in the memorandum may be subject to various penalties, including criminal penalties such as two years’ imprisonment.