ISA Looking to Europe For Improving FX Trading

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The Isreali Forex industry is considered to have a Wild-West style of regulation by more than a few people. The regulatory body of Israel’s securities aptly named the Israel Securities Authority (ISA), released an announcement on Sunday detailing the regulator’s intent on reformations. They explained that they were going to follow ESMA’s footsteps in their upcoming legal framework.

The New Rules

This framework will reduce the amount of possible leverage on trading as well as forcing transparency on a trader’s figures concerning their profits and losses.

The new leverage tiers are relatively simply designed. Low-risk trading allows traders to leverage from 1:100 to 1:30. Medium-risk enables trades between 1:40 and 1:20, while high-risk ones only allow 1:20 to 1:5.

Adding to it, the ISA will mandate brokers to report the number of losses and gains that happen with their traders. While the data isn’t public at this time, it’s given to the ISA on a monthly, quarterly, and yearly basis to ensure all is well within a trading firm.

The Implications

While some show worry and dismay over this move, Tzah Druker does not. The Chairman of the TGL Colmex Capital Markets LTD and Head of the Isreali Trading Arena Association (ITAA) said that that ITAA is cooperating with the new legislation. He explained that the ISA is leading a long process to develop the legislation, and ITAA itself has been involved for roughly a year.

Druker states that Israel’s regulations need to adjust to something similar to the EU’s. He explained that ITAA has been supporting a good part of the legislation’s components, though that makes it clear that the two groups aren’t in complete sync.

While the ISA’s efforts to regulate the Isreali forex industry has more-or-less made many forex companies close their doors, as well as making eToro pull out of the country, the ISA has created a safer environment to trade within. The ISA had started this trend back in 2015, with an intent to entirely eliminate the binaries industry from their country’s borders.

A Consolidation of an Industry

Druker believes that this new legislation won’t push another broker out of Israel’s borders, even if it will severely affect all the brokers involved. Druker reasoned that the move will consolidate Israel’s trading industry and compares to what is happening now to what has happened in Europe.

While in the short term, Israel’s trading will suffer through lower traffic, the long term effects of this cannot be stressed enough. Israel regulating its trading industries will allow investors from outside its borders to feel more at ease as they go in wanting to make money. Risk is an ugliness investors rarely appreciate, and the less risk you can guarantee, the more investors will show up to profit.

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