The Regulation of Forex and Other Trading Platforms in Israel
04/03/2015
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Dear clients and friends,

New Israeli regulations pertaining to activities of trading platforms will come into effect on May 26, 2015. These regulations will directly affect the activity of Forex, binary options and other trading platforms, Israeli and foreign, that operate in Israel or target Israeli clients. Companies wishing to continue existing operations in Israel must apply for a license by May 26, 2015.

The enactment of the regulations follows the adoption of Amendment 42 to the Israeli Securities Law, which was legislated as part of an attempt to regulate activities of companies managing trading platforms and subordinates trading platforms’ activities to strict oversight by the Israel Securities Authority (the “ISA”).

The regulations subject trading platforms to extensive restrictions, including licensing requirement by the ISA, extensive reporting duties to clients and the ISA, minimal equity requirements, duties regarding management of conflicts of interest, a prohibition on provision of investment advice to clients, rules regarding advertising, and permitted leverage on financial assets.

The regulations require the trading platform to undertake a process of determining the suitability of clients to the trading activities and associated risks. This process must be documented and should include questionnaires and other examination forms that enable the trading platform to evaluate the client’s understanding of the risks involved in the client’s activities.

The regulations also require trading platforms to allocate sufficient funds to support market risks, credit risks, liquidation risks and operating risks, as well as to develop and use techniques to manage risks.

The permitted leverage rate for clients of the trading platform is as follows and depends on the traded financial asset: high risk assets, have a permitted leverage ratio of up to 20:1 of the trade’s value; medium risk assets have a permitted leverage ratio of up to 40:1 of the trade’s value; and low risk assets have a permitted leverage ratio of up to 100:1 of the trade’s value.

The regulations require trading platform to submit to the ISA monthly reports, activity reports, credit risks reports, and market risks reports. The trading platforms are required to provide clients with transaction approvals, which include information regarding transactions executed and the accumulated balance of the specific financial asset following the execution of the transaction, bi-weekly and detailed monthly reports.

Parties acting in the Israeli market or targeting Israeli clients without an appropriate license may be exposed to criminal and administrative proceedings (including possible sanctions of imprisonment and fines).

This publication provides general information and should not be used or taken as legal advice for specific situations, which depend on the evaluation of precise factual circumstances.

No Fields Found.