ISA to Adopt ESMA-Like Restrictions on FX Trading

Israeli forex industry is about to face yet another blow to its operations in the country. The Israeli Securities Authority (ISA) has published on Sunday its intentions to follow the.
The proposed framework will include a reduction on leverage on trading, alongside transparency demands on the traders’ profit and loss figures.

Less leverage, more transparency
The new three-level tiered leverage will be as follows:

  • Low risk trading: from 1:100 to 1:30
  • Medium risk trading: from 1:40 to 1:20
  • High risk trading: from 1:20 to 1:5.
  • Brokers will also be required to report on the share of gains and losses among their traders. Currently, this data is not public and is gathered by the ISA on a monthly, quarterly and yearly basis.
    Joint efforts
    In a talk with Finance Magnates, Tzah Druker, Head of Israeli Trading Arena Association (ITAA) and Chairman of the Board at TGL Colmex Capital Markets LTD (one of the four ISA licensed brokers), stated that he’s not worried over this move.
    According to Druker, the Association and its members are working with the regulator to further such legislation.”This decision derives from a long process that the ISA is leading, and in which we are involved for around a year’s time.”
    Not only that we are not against this plan, we are even supporting most of its components. Adjusting the Israeli regulations to those of the EU and other countries, is a much-needed action.”
    Possible self-regulation
    Israel is currently facing a political deadlock, after two election cycles that lead to tie results. It is not clear whether the various parties will be able to form a government, or if the country is headed to the poles for a third time in one year. “The current political situation may cause this initiative (along with other no-less important financial legislation) to be postponed. Currently, the Knesset barely has an active legislation process. Same goes for its committees and the various ministries. Beyond that, if and when there will be a functioning government, it will have to deal with a major backlog, and regulating the FX industry is not necessarily at the top of their list.”
    However, if the ISA and ITAA reach an understanding, these restrictions might be implemented by the brokers themselves. “We are aiming to come to an understanding with the ISA, regardless of the legislation process. If the we’ll find middle ground, the Israeli licensed brokers will adopt the measures on their own.”
    Having said that, Druker believes that this move must be a part of a bigger change in the legislation on trading. “The mere reduction of leverage isn’t sufficient. The ISA should also expand the array of the financial tools that an Israeli broker can offer its investors. Offerings like low-leveraged cryptocurrency trading, for instance, can be a good step forward.”
    Consolidation is coming
    This is yet another milestone in ISA’s efforts to regulate the Israeli forex, along with the elimination of its binary options industry. This process, that began in 2015, has already brought in the country, and others – – to revoke their license application.
    Druker thinks that while this move will not cause more brokers to abandon the Middle Eastern country, it will definitely have a major impact on the brokers’ activity. “This move will probably lead to a consolidation in the Israeli industry, similar to what we’ve seen in Europe.”

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