Binary option firms in Israel have been feeling heavy pressure to curtail operations, and at least one leading trader, Banc De Binary, says it’s going out of business, according to Reuters on Wednesday.
Banc De Binary, one of the biggest and best-known providers of online trading in binary options, which allow investors to bet on short-term moves in financial assets, cited regulatory pressures as the reason for shutting down.
“Banc De Binary will be gradually downsizing its operations due to regulatory constraints,” the Israeli-owned and Cyprus-registered company said in a statement emailed to Reuters.
“For clients that have eligible funds in their account, we are encouraging them to withdraw the remaining balance.”
The firm has been beleaguered by regulatory issues recently. Banc De Binary paid $11 million in restitution and penalties in the United States last year over allegations that it signed up U.S. investors illegally.
Israel’s chief securities regulator Shmuel Hauser said in November he was cooperating with authorities in the U.S., Britain, France and Belgium to investigate complaints against Israeli firms marketing the risky online options abroad.
More than 100 such firms are estimated to be working in Israel, where the sector has been thriving. Of the $2 billion contributed this year by the securities and derivatives trading industry to Israel’s GDP, $1.25 billion of this amount, 63 percent, comes from the binary options industry. This translates into huge profits for the options sellers — an estimated $5 billion profit for tax purposes, which means that the revenue is much higher. (However, because of tax shelters and various other dodges, they may be paying much less, if anything, in taxes.)
A Reuters special report published in September quoted accusations by clients of London-based lawyers who say they have been duped out of vast sums of money by some Israeli firms.
Binary options usually involve betting on whether individual shares, indexes, currencies or other securities will go up or down in a given period of time. The time for the option to “mature” is short – as little as a minute.
Securities regulator Hauser banned companies from selling binary options in Israel in March and has asked the attorney general to consider changing the law so he can ban Israeli companies from selling binary options abroad.
The Knesset is working on legislation, a draft of which is expected to be presented in the coming weeks.