Israeli Forex market, and how exactly it works

Contents

1 Israel’s top Forex brokers
2 Israel’s Forex regulation
3 Pros and cons of going with Israel based Forex brokers
4 Verdict on the Israeli Forex market

This middle-eastern country quite possibly has the single deepest and richest history in the world, which dates back to thousands of years. With a population of 8.6 million and a GDP of $370 billion, Israel is a country with one of the highest standards of living in the world. This should come as no surprise, as the country and its populace are sometimes jokingly considered to have some kind of a mythical association with money and prosperity.

Myths aside, Israel’s economy is definitely very strong, and it’s one of the biggest financial players in the world at the moment. Besides this, Israel also happens to have a thriving Forex market that provides ample opportunity for the motivated local traders to be successful and make a profit by trading. In this guide, we will be taking a quick look at the Israeli Forex market, how it works, what are the legal specifics, and pretty much everything important that any Israel-based trader might need to know.

Israel’s top Forex brokers

When choosing your broker, there are tons of things to take into account – the availability of options, usability of their platform, safety and security, and much more. The latter was especially a problem for Israel, as for many years, it lacked a proper regulatory framework that would provide a safe and effective space for individuals interested in Forex trading. Below is a list of our picks for top Forex brokers in Israel, with whom you can trade safely and have the best chances of being successful. Take a look at all of them below, choose the one which fits your requirements the best, and get started with trading in Israel today!

XM

Min. Depo

Licences

FCA, CySEC, IFSC, ASIC, DFSA

Leverage

1:888

1:200

Platforms

MT4, WebTrader, Copykat

Global GT

Min. Depo

Licences

FSA, FSCA

Leverage

1:1000

Platforms

MT5,

Plus500

Min. Depo

$100

Licences

FCA, ASIC, CySEC, FSCA, FMA, MAS

Leverage

1:30

Platforms

WebTrader, Windows 10 Trader

Israel’s Forex regulation

As we have mentioned, one of the primary issues that Israel has had over the years is the lack of an effective regulatory environment. This was to be its single biggest challenge, which still, to some level, persists today. However, it’s doubtless, that situation is infinitely better today, and Israel, in terms of its regulatory environment, has definitely gone to the next level.

Before getting to this point, though, the market was having serious issues with scams and fraud. This was happening because there were a lot of foreign brokers operating there from other countries such as Cyprus, and due to a lack of regulation, Israel was not able to control and ascertain that these brokers were operating in an ethical manner, and that they were not harming the traders.

Israel Securities Authority

This would soon change in 2015, when Israel passed numerous legislations, effectively reinventing its regulatory framework. The authority behind this is the Israel Securities Authority (ISA), which is the sole authority responsible for overseeing Forex trading in the country. Israel slowly started introducing changes that could be seen as a combination of laws, requirements, restrictions and guidelines, all aimed at improving the market conditions, and increasing the safety and integrity for all parties involved.

Forex brokers interested in doing business in Israel need to apply for a license from ISA before they’re allowed to operate in the country. Naturally, the obtainment of the license, has numerous conditions and requirements, the fulfillment of which demonstrates the merit of the broker. Only the brokers that manage to satisfy these conditions are eligible for the license. This ensures, that the bar is set high, and only the qualified brokers are allowed to operate. Let’s take a quick look over these implementations, and discuss how they have managed to take the market in a positive direction.

Capital requirements for a license, and license levels

One of the key requirements for the brokers seeking licenses is the requirement of the minimum capital. As ISA mandates, a broker can only obtain a license if they have a minimum capital of ₪800,000, which would be close to $200,000. Only the brokers that manage to satisfy this requirement are given the license. Obviously, this is quite a demanding requirement, the goal of which, as we have mentioned, is to raise the bar of entry, and thereby raise the quality of the brokers, so that the traders have access to superior service.

This license is, however, only one of the several licenses that are available. You could say that this is the lowest level of them all. The brokers can obtain what the regulators refer to as the “full license”, which has a much higher capital requirement of ₪1,500,000 (about $380,000). Additionally, they have to be partnered with liquidity providers, with the goal of protecting themselves from the volatilities of the market.

But wait, there’s more! The final and the highest degree of licensing that the brokers can apply for has the requirement of ₪4,000,000 (Around $1 million), which the broker needs to have in reserves.

These licensing levels are relevant to the brokers themselves, as they gain access to different permissions as they move upwards. Naturally, the higher the licensing level, the higher trust you can put into the broker, as besides the money itself, there are many underlying things that the regulator takes into account. Just because a broker is able to pay the fee, it doesn’t mean that they will get their license. Regulators are looking out for many other factors, all of which are relevant to demonstrating the broker’s trustworthiness.

Additionally, even after getting a license, the brokers are subjected to a lot of reviews and audits, which are quite frequent. The goal of these reviews is to monitor the brokers and ascertain that they’re always following the relevant laws and requirements. Companies that fail to do so will be penalized accordingly, which can be in the form of a fine, or suspension of the license.

As you can see, Israel takes the issue of licensing very seriously, and they have a very thorough and extensive approach towards determining which particular brokers are qualified to get the license. What this means for you, as a trader, is that you will have access to only the brokers of highest possible quality, which not only provides you with the highest chances of success, but also safety, and the ability to enjoy trading with peace of mind.

Informing the public

A great approach that has worked wonders for ISA is focusing on increasing the awareness of the public. We all know how much of a risky business Forex trading can be. No matter how good it may be going for you, everything does have the potential of changing in a single moment. This increased riskiness and volatility is something that many people, especially the beginners, simply have no understanding of, which can often be a cause of a lot of damage for these people.

This is a common concern for pretty much any Forex environment, and that’s why many Forex regulators, ASI included, are taking the initiative of increasing the public’s awareness. ASI has made it mandatory for all the brokers to deliver the information to the public about just how risky these trade instruments are. With things like CFDs and products with high leverage, the brokers are legally required to put forward detailed disclaimers about the associated risk with these products. The best way to deal with these damages is to prevent them in the first place, so this approach is very effective.

Qualifying the customers

Besides focusing on increasing the awareness of the public, ASI has also made it mandatory for the brokers to be much more conservative on who can be allowed to trade with these risky instruments. In general, before someone can even make their first deposit, the brokers are required to make sure that they’re at least 18 years old.

Beyond that, the brokers have to obtain detailed info about their experience level, financial situation, and more. While this may not seem like a big deal, it definitely is, because having this detailed information about one’s financial and life situation gives an insight as to what are the best suitable trading strategies for them. If an individual has a weak financial condition, as well as lacks the necessary experience to be involved with highly leveraged products, then brokers can not offer these services to them.

Account segregation

To make sure that the funds of the traders are safe and sound, ASI demands the mandatory account segregation. This means, that the brokers are required to keep your funds in a separate bank account, which is going to be different from the one where they keep their own operating capital. Why does this matter? Well, in case your broker goes bankrupt or loses the money in any other way, your funds will be kept safe, separately.

This also makes sure, that the broker will not be able to misuse your funds, whether intentionally or unintentionally. Account segregation is a common practice that we see with many other international Forex brokers, such as FCA of the UK, and it’s a very effective additional layer of security.

Leverage limits

Expectedly, ISA has also imposed certain limits on leverage as well. In Israel, brokers are allowed to offer leverages in different numbers, depending on the volatility of the asset. As an example, for the riskiest assets with the highest volatility, the brokers are allowed to offer leverage no higher than 20:1. For the medium level, 40:1, and for the assets that are considered to be low-risk investments, 100:1.

These leverage levels are quite reasonable, and in fact, higher than what many major Forex countries from regions like Europe offer. In contrast with many countries from other regions, such as Japan, where leverage is as low as 5:1, this is definitely on the higher end. Though ISA is definitely very strict in certain aspects, it is more relaxed in this regard.

A note on brokers that are licensed from other countries

With strict regulations such as this, it’s logical to assume, that many brokers would be quite apprehensive about seeking the license from Israel, and this is definitely the case. What you will notice is that there are many brokers that are licensed from other countries, where the regulations are more favorable. A prime example of this is CySec, which is the Forex regulatory authority from Cyprus. As of now, there are tons of international Forex brokers that are licensed out of Cyprus, the reason being a much easier and more lenient licensing process.

When it comes to deciding whether or not you should be going only with the Israel-based Forex brokers, the answer would be that it completely depends. In general, it is highly preferable to go only with brokers that are locally-licensed, if the opportunity to do so is there. Why? Because the only true way to ensure 100% safety is to go with the brokers that your very government trusts. Additionally, in case of any disputes with your broker, everything will be dealt with based on your local laws and regulations, which is definitely a huge help.

With that being said, there is absolutely no reason to stop considering a broker just because they’re not locally-licensed, whether that be with Israel or any other country. There are tons of brokers out there who are operating in many different countries but are only licensed with one regulator. Forex brokers from different countries allow the brokers to operate in their countries, provided that they’re licensed with other reputable authorities.

As an example, if a broker is licensed by any country from the Eurozone, such as Finansinspektionen from Sweden, then they are also allowed to legally offer their services to other Eurozone countries such as Germany. As an Israeli Forex trader, if you usee that a broker is licensed by a reputable regulator such as the UK’s FCA, then as a rule of thumb, you can be fairly sure of their trustworthiness.

Israel Forex trading opportunities

Israel’s economy itself is rather interesting and unique. The key economic strong points of the country come from the industries that are knowledge and skill-based, such as industrial manufacturing and high technology development. The reason for this is that in the past decades, Israel has had a rapid increase in highly talented and educated workers in these fields. Right now, the country is enjoying a strong economy that is always growing and providing newer and better opportunities for everybody. This can be seen only in the fact that Israel is a country with one of the highest startup numbers in the world, with the USA being the only one who surpasses them.

The country’s national currency is the Israeli Shekel, which has been in use since 1986. The Shekel has been traded on the international Forex markets since 2008, meaning it’s a rather “young” currency when it comes to Forex trading, and it attracted a lot of Israeli citizens to Forex trading.

If you’re interested in trading on the Israeli Shekel, you have to take into account, and keep track of, the main factors that will be affecting its value and performance. Which, of course, will be Israel’s economic sectors that it’s based on. As mentioned, these are sectors like computer technologies and advanced industrial manufacturing. Israel hosts the research and development centers for some of the biggest and most successful tech giants in the world, such as Intel, Microsoft, and Apple.

Despite the fact that Israel mainly excels at skill land knowledge-based sectors, its export numbers are rather diverse, as it exports a bit of everything. As an example, 4.6% of its exports come for integrated circuits, 2.17% for pesticides, 6.85% for packaged medicaments, etc. In terms of natural resources like oil, Israel does not happen to be particularly rich in them. However, it happens to be one of the biggest exporters of diamonds in the world, with 23% of all global diamond exportations coming from them.

As you can see, Israel’s economy and its commodity trading opportunities are not defined by majorly excelling at one single thing, but rather, its strengths are spread out over multiple different branches, which is a great thing, as this will be a huge help in having access to a lot of options and diversifying your capital. In Israel, without a doubt, any type of a Forex trader can expect loads of different opportunities and avenues to explore.

Pros and cons of going with Israel based Forex brokers

Here are what we believe to be the stronger and weaker sides of Forex trading:

Pros

A very safe environment for trading
Strong local economy
Higher leverage than usual

Cons

Not a lot of locally-based brokers due to strict regulations

Verdict on the Israeli Forex market

Considering how it started off, the level that Israel reached now is quite impressive. As of today, it offers a safe, diverse, and encouraging environment for Forex traders, where any trader with any specific goals can enjoy a lot of opportunities. If you are interested in getting started with Forex trading in Israel, then don’t waste any more of your time, as now is definitely the best time to get started, considering how Israel’s market was, and how it is now. Make sure to check out all the brokers that we have listed above, and you will be able to find your best Israeli Forex broker today!