You are not logged in.

  • Index
  •  » Broker News
  •  » Here's where brokers are mistaken in terms of ESMA restrictions

#1 19-02-2019 13:52:45

johnedward
Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3594
Website

Here's where brokers are mistaken in terms of ESMA restrictions

Here's where brokers are mistaken in terms of ESMA restrictions


http://www.forex-central.net/forum/userimages/forex-brokers-regulation.PNG


Article by Konstantin Rabin:

The European Forex industry has been under new ESMA regulation for a while now. While many brokers consider the new set of rules to be extensively limiting, others are praising them for protecting traders. These rules concern a wide range of items: prohibiting trader benefits (bonuses, for example), removing IB rewards (based on trading volumes), and most importantly – downgrading the maximum available leverage.

In this article, I decided to focus on how EU-licensed forex brokers have been handling the rules concerning maximum leverage. To find out, I got in touch with the support and sales teams of the largest Forex brokers, in terms of their trading volumes. Through the available channels, I requested help from said companies, specifying that I was a European trader, looking to trade with lots of leverage. During the chat, I specifically requested 1:100 and 1:200 leverage options, which are above ESMA’s imposed 1:30 maximum leverage for retail traders.

Complying with and getting around regulations

Of course, most companies specified that the account would have to be upgraded to a pro account. But, within a few minutes of speaking, each company would offer us an alternative. Most of the top rated companies are also licensed abroad in areas where ESMA regulations don’t apply. The representatives of these companies would direct us to create accounts with entities licensed in:
Arrow The Bahamas (3 companies)
Arrow Australia (5 companies)
Arrow South Africa (2 companies).

Insisting on making an account with the broker in Europe resulted in us having to register with the broker and fill out an application that would prove our compliance with three requirements:

Arrow Having a history of large scale deposits with the broker
Arrow Having assets over 500,000 euros in assets
Arrow Having years of professional currency trading experience

Proof of two was required, but not with all brokers. Some of them simply asked us to confirm and sign, giving us almost immediate access to professional trading.

The discovery is a little daunting: out of the 12 EU brokers that I contacted, 10 directed an EU resident to register with their brokerages in alternative jurisdictions where ESMA regulations aren’t enforced. The two that did not direct us to do so do not have entities outside of EU borders and simply asked us to verify (without proof) that I'm qualified to be a professional trader.

Is this a good way of getting around it?

While sending EU traders to entities with alternative regulation might be a decent short-term strategy, I feel it might fail in the long run. I believe there are better alternatives that allow traders to participate in high leverage trading. I also believe that ESMA is going to catch on and start imposing harsher regulations upon brokers.

Helping traders achieve higher levels of education and become actual pro traders is a better option. By creating traders that are skilled at using complex analytical techniques during trade, brokers will be able to encourage their growth in terms of ability and capital. Eventually, this will lead to traders becoming eligible for pro trading within the EU.

Brokers for education

In the past, brokers considered their online and offline education efforts to be linked to their marketing efforts. The webinars and seminars mostly touched upon basic topics: What is forex trading? The basics of technical analysis, etc.. However, it does seem like in the post-ESMA times things are finally changing.

Recently, there has been news of a series of professional seminars organized by Elite CurrenSea and sponsored by XM. These events are mostly centered around education regarding trading tools and analysis and feature award-winning speakers. The target audience for the events is either professional traders or those who want to become professional traders.

Previously, a similar event was held in Ljubljana, Slovenia. Elite CurrenSea has emphasised the importance of education within the trading industry and is encouraging retail traders to get better by learning more about professional trading. They are hoping to create a new class of retail traders, who can trade on a professional level and are eligible for pro trader categorisation.

Another example of constructive action towards educating traders is the product offered via the HotForex and BlueSkyForex partnership. These two brokers have taken it upon themselves to offer a broad range of webinars, dedicated to helping their traders achieve higher levels of mastery over the markets.

These webinars cover:
Arrow Live analysis
Arrow Wolfe wave trading
Arrow Scalping strategies
Arrow and other elaborate techniques

The webinars on the same subject take place several times over. This gives traders a chance to either get refreshed on the concepts or ask questions they had not previously considered.

Admiral Markets, another forex broker that some may be familar with, is also offering an in-depth, 20-day forex course. The course, according to the broker, is intended to provide even complete beginners with the tools and knowledge needed to trade successfully on an almost professional level.

Last words

The fleeing of users to foreign countries will empty the European forex market. It is important for brokers to understand that the best way to increase their ranks of pro traders is to provide opportunity, rather than provide an easy way out. Sending traders to other jurisdictions is a short term solution that provides little benefit to either side. Positive action towards promoting trader education allows traders to get better at their trade and achieve new milestones, while also increasing broker revenue.

Konstantin Rabin is the CEO of Finance Makers – a digital marketing and content creation company serving the financial services sector

http://www.forex-central.net/img/banners/Ava-728x90.gif


"Anything worth having is worth going for - all the way." - J.R. Ewing

Offline

 
  • Index
  •  » Broker News
  •  » Here's where brokers are mistaken in terms of ESMA restrictions

Board footer