31 May AtoZForex, Vilnius — Over recent time, the Israeli authorities have implemented extra safety measures and regulations in the local Forex industry. All for the purpose to create a secure and safe market in Israel. Particularly, the regulator has put its attention towards trading arenas. Related to the new legislation on trading arenas, iFOREX shutting down of Israeli operations got announced today.
New Forex regulations in Israel
Trading arenas are computerized systems that allow their customers to trade in various types of financial instruments. Trading in the arena allows customers to perform high leverage – 100 times compared to 12 times in the Stock Exchange. However, due to risks, ISA began to monitor the area last year. The regulator stated that to operate the trading arena the company has to apply for a license from the watchdog.
More regulations state that brokers have no right to grant gifts or bonuses to their clients; clients can make their deposits by credit card bank/wire transfer, not by debit card. Moreover, at least once a year, all brokers must ask their clients to view and sign conflicts-of-interest policy.
Really, is iFOREX shutting down?
iFOREX is an online trading company with annual revenue of $100 million. The broker has a significant global presence and is operated and managed through the international divisions of Formula – the main market maker of the group. The company owns the intellectual property rights for the iFOREX brand.
Various reports since morning have declared that the broker is shutting down its operations in Israel. The website of the Israel-based iFOREX states an announcement (Hebrew) that the broker decided to pull its Forex broker license application and to terminate its brokerage operation in the country. According to the notice, all open positions will be closed by the company (if not by clients) till 6th of June, 2016 23:59 local time. Several sources state that iFOREX came to this decision because new regulations over retail Forex transactions with Israeli clients were too onerous to comply with. However, the story is not that simple.
Collaboration with A Online Capital
A year ago, when the ISA regulations were about to enter the force, iFOREX made a decision to apply for a license by finding a partner within Israel who would have significant experience in working with Israeli regulatory authorities. After the search, the company decided to collaborate with A Online Capital – the publicly listed on the company Tel Aviv Stock Exchange. The company was considered to be suitable for opening a trading arena with the purpose of offering exchange traded equities to retail clients in Israel. After signing the agreement, the new company was established with iFOREX's brand name, IT systems, trading platform and marketing facilities. Along with that, the company applied for the license and the process was going on for a year.
However, recently, ISA was implementing a number of harsh decisions like the bans on exotic currency pairs and Binary Options. Further regulations appeared to require a very high cost to comply with to justify a local business, taking the size of the local market into consideration.
Due to that, A Online Capital filed a notice to the Tel Aviv Stock Exchange about ceasing the partnership with iForex. The company decided that in the light of new regulations it would be not profitable to open a trading arena. As a result, the company asked iFOREX to withdraw the application for the license. It is clear that the decision to pull the Forex license was taken by A Online Capital rather than by broker.
What is next for iFOREX?
As A Online Capital did not express the wish to continue with regulatory discussions, iFOREX accepted the decision and as an international company decided to proceed with international markets with already existing regulations and, allegedly, nothing has changed in company’s modus operandi. However, without the appropriate license from the ISA, the broker cannot continue operating a trading arena.