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#1 29-07-2019 16:19:57

johnedward
Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 2561
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Do Swiss brokers benefit from the ESMA's measures?

Do Swiss brokers benefit from the ESMA's measures?


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Last year was characterised by evolutions in the EU's forex industry. Since the implementation of ESMA's harsh and restrictive rules, EU brokers have faced a major obstacle, but other nations have benefited from these measures, and one of them is Switzerland.
Switzerland's forex industry

In Switzerland, the forex industry is overseen by the FINMA agency. It regulates local banks, insurance companies, stock market exchanges, forex brokers, to name but a few.

In Switzerland, brokers are licensed to conduct business. There, financial companies need to have a minimum working capital of 19 million Swiss francs and a solid record in order to handle transactions.

In neighbouring EU countries, though, there are more lenient requirements, such as having just €100,000 of capital. The Swiss requirements resemble those of North America, especially in terms of minimum working capital.

Only 2 Swiss brokers still accept European private traders - Swissquote and Dukascopy. The former is the country's leading forex broker. Beyond those two, a few other brokers also have local operations. 

Elena Christdoulou of the Tickmill company says: "Although Switzerland attracts lots of wealth management companies, thanks in part to its attractive taxation system, it's also one of the world's leading forex transaction hubs."

"As Switzerland's forex industry is already quite advanced, the differences available to traders between Swiss regulated brokers are very limited."

The unique Swiss position

The Swiss are in a fortunate position. Although they aren't officially in the European Union, they enjoy many similar benefits. 

Are individual traders moving their activities to Swiss operators? Typically, brokers don't reveal their clients' exact demographics. But, according to information provided by the Swissquote brokerage, we observe that since the third quarter of last year, the broker has benefitted from a big jump in trading volumes as well as new account creations.

EU brokers, though, generally felt the opposite effect. 

Did the Swiss brokers benefit from the harsh ESMA measures?

At this point, we can only speculate whether Swissquote's data is thanks to European traders who have opened accounts with them. Upon examination of foreign exchange transactions across the market, the same results appear. As of last year's 3rd quarter, new accounts and trading volume has been on the rise in Switzerland.

"New ESMA rules have obviously affected the sector's characteristics," says Christdoulou.

"Investors who want higher leverage are fleeing European brokers. Some are coming to Swiss brokers while others are going yet elsewhere. It depends on other factors such as spreads and min. account size requirements."

Trading activity in Switzerland

"Switzerland's traders have a clear preference for trading the main forex pairs as well as gold and cryptocurrencies. Furthermore, their risk appetite is rather average", reports Christdoulou.

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