Binary options are open to a vast pool of traders because they allow subtle investments limits which make them more affordable to a variety of people. The popularity of binary options has come as a surprise, and it is baffling a lot of individuals who are still to come to terms with this new wave in financial markets. Most people expect many countries to embrace binary options as a key player in the financial industry but to most people surprise they are not universally accepted.
Some states did not take long to identify the potentiality of binary options, for instance, Cyprus was amongst the fast nations to recognize the possibilities and financial potential that binary options come with. On the contrary, other countries are so much against binary options to the extent of ignoring their primary existence. It is hard for binary options traders in such destinations because they are not aware of what to expect, and they are highly taxed to transact using binary options platforms. Also, in these countries, binary options trading is neglected and not regulated which makes it risky for traders because there is high volatility, and cases of scam are so obvious in such unregulated markets.
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Some other countries are putting efforts in recognizing binary trading by creating a better business environment for traders and brokers to operate. States can create particular conditions by creating regulatory bodies, rules and standards that guide most of the market activities. Regulation of binary options trade enables traders to feel more secure and is motivated to trade because they know they are protected by legal standards and laws which make it difficult for people and brokers to breach the contract. The United States and Israel are at the forefront of creating regulation policies, and some people think such policies are strict. The increase in policies and laws helps seal loopholes that may result to people being frauded of their hard earned dollars. A market with more policies ensures there is sanity ion the market and the traders relate with the brokers under legal terms and authority.
The Relationship Between Traders, Brokers and The Government in Israel
The link between the three major stakeholders in Israel is described with complexity of relationships. In Israel binary, options are regulated by Israel securities authority. Israel securities authority has been perceived by many as being too tight on binary options issues in the country. The regulatory body was initiated in 1968 and continues to be a primary regulator in the countries financial markets. The initial mandate of Israel securities authority was to curb and reduce insider trading, fraud and other financial malpractices which negatively affect the safety of investors in the small Jewish state. Israel took long to take binary options as an important niche in capital markets trading.
When Israel elevated the capital gains tax most traders in the country started seeking other avenues to increase their profits through financial capital investment. Binary options and Forex trade provided an ideal opportunity with foreseeable advantages and gains in financial markets. This shift of most Israel traders to forex and binary options resulted in the collapse of the Tel Aviv stock exchange. The drop in Tel Aviv stock exchange sales was apparently blamed on the entry of binary options into the country financial trade. The government watched hopelessly as binary options took over finance trading markets reducing the number of people trading in the traditional financial markets, for instance, the Tel Aviv stock market. The government took advantage of the situation and created a regulation body to reduce the cases of rising number of fraud and scam cases in the binary options trade.
Regulation of binary options trading in Israel
In the year 2010 the government started to regulate binary options trade, this activity was made official by creation of a set of laws and regulations. The famous (Amendment 42) was implemented in 2015 and provided a guideline and a framework for binary options trading creating sanity in the market that was previously marred by chaos and disorganization. This amendment so to it that all locally operating binary options brokers had to be registered within a set deadline in order to continue rendering services in this lucrative market. To date, new brokers are required by law to enlist themselves with the regulatory body before they commence any activities in the country. The regulator has drafted a number of requirements that brokers in Israel binary options trading market have to meet. The body closely follows most of the activities of the brokers to ensure the requirements are met without fail.
Requirements to be met by all brokers in Israel
Before brokers are required to trade in the Israel financial markets using binary options there are conditions that they have an obligation to meet; brokers, have a duty to operate on a particular minimum capital that is computed in relation to the total trading volume. Among other conditions, traders are required to observe strict market restrictions. Brokers are required to provide quarterly and yearly reports on various subjects to both binary options dealers and the Israel security authority report all transaction to the Israel security authority and report their duties and activities to the individual traders. These regulations serve to protect traders from scam and also ensure that the government benefits through taxes. Unlike an unregulated market a regulated market provides security to the traders and increases the total trade in such a market.
Market protection and binary options traders
Consumer protection is a significant factor in most markets, consumer protection can be created by consumer organizations, government agencies, non-governmental lobby groups and sometimes even producers themselves. Consumer protection is an important tool to contribute to creating sustainability in most markets. Consumers require to be protected from aggressive advertisements, abnormal pricing and to ensure organizations deliver what they promise to. Consumer protection is a continuous activity that is every government top priority when they create laws and regulations to govern and promote safe trade especially in binary options trade where there have been an incidences of scam in which most customers lose their deposits.
Additional rules in binary options advertising are aimed at promoting a more educative advertisement strategy since most consumers are not aware of the risks involved in this trade. Many brokers are not sincere to clients in that they tend to conceal the involved risks to their customers and prospective customers. This behavioral activities is very unacceptable and can result in clients being forced to trade in unacceptable risks that they are not even aware of themselves. To respond to this government agencies regulating binary options has made it mandatory for brokers to include risk warnings in most of their advertisements to make the consumers aware of the risks they face. This has made advertisement of binary options through online media difficult because most online advertisements have to meet a certain word count. Google advertisements are also difficult to make since they require a full risk disclosure.
Regulatory authorities have to ensure the safety of the traders by making sure that the binary options brokers assess the client suitability to participate in binary options trading. Brokers have to make sure operators are aware and understand the risks involved in these trades. Traders who want to join the binary option trade are required to fill particular registration forms and questionnaires before making deposits. It is also a requirement to for brokers to establish documentation of every transaction taking place in an organization. It is further a requirement by the regulatory body for all organizations in binary options trading in Israel to create a kitty to caution the traders against all potential risks.
The regulator also makes sure that there is a leverage rate that is established and should be observed by the binary options brokers. High risk assets should create a leverage amount of up to 20 to 1 of the total trade value. Medium risk assets should be allocated a 40 to 1 of the trading value whereas the low risk assets are accorded a 100 to 1 ratio of the value traded. These changes in business operations and regulations have not made everyone happy in this particular market. The traders are enjoying a lot of comfort and protection whereas binary options brokers are expressing a lot of discomfort because of the increased regulations that are in the favor of the client. It has been noted by some stakeholders in the legislation bodies that these rules will cause some brokers to exit the market. Other dealers in the market will be forced to resort to mergers and partnerships to increase their ability to compete. These regulations are aimed to protect the traders which will result in the growth of the number of traders which will make binary options trading more vibrant than before in the unregulated era.
Consequences and benefits of strict binary options trading regulation
The strict regulation has affected different stakeholders in this business differently; depending on an individual perspective strict regulation has both active and adverse effects of the general trading environment. Traders in binary options in Israel can now carry on their transactions in a more safe environment that is regulated by the Israel Securities Authority. Binary trading as a re3sult of strict regulation is now user friendly and reliable than before with high percentage of consumer safety and expected formalities in all the activities. Due to the regulation requirement for provision of the risk information to the traders consumers are now much aware of the options they have and their expectations. The prohibition of wrong and decisive advertisement has ensured honesty in the advertisements and less cheating of trades.
Although these regulations have had unlimited benefits to the traders and the regulation bodies some traders perceive them as unfriendly which has caused them to relocate to other less regulated markets. Less regulated markets elsewhere also features cheap operating costs since not many monetary securities and protocols are required. It is even worse for the brokers in Israel because the law forbids traders from using brokers that are not regulated and certified by Israel securities authority. Huge fines and cost of doing business have really affected binary options brokers in the market making it even harder to operate in the market.
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Binary options have continued to feature global markets entry, Israel was among the few nations who have identified the critical role of binary choices in the financial industry. This resulted in a close supervision of the activities of the traders with the aim of protecting traders and other investors in that financial market. It has been useful for traders in these markets since consumer safety is assured by strict rules and regulations which are clients friendly. Education on the risks and formalities involved in the trade is provided to traders even before they enlist with any broker. This has improved the trade in the market and also made trading in binary options a valuable form of financial investment that is able to compete with stock exchange markets.
The government initiative to regulate that market has contributed to the growth of the trade and also has made it more lucrative than in other possible markets around the globe. Strict regulations however has resulted to the close down of some binary options brokers who deemed the regulations as unfriendly and also has led to increased costs to trade in Israel market. The government has so far improved sanity in the market which was previously unregulated resulting to the loss of clients’ money through scam brokers who were exploitive.
It is expected that the market will even get better and the number of traders is going to increase due to the growing safety of the traders and government regulation. Increased education also has made more people aware what binary options are all about and the risks and rewards involved. What we recommend is that you take a proper Binary Option Robot with your assistance to trading and start making profits with minimum risk. Get your free robot now!
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Michael Allen is the main author at www.binaryoptionrobotinfo.com. He holds a PhD in Economics and has worked in investment banking for 24 years.
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