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#1 06-01-2020 08:40:36

Admin & Trader
From: Paris - France
Registered: 21-12-2009
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2019: a year of migrations for brokers and traders

2019: a year of migrations for brokers and traders
It goes without saying that last year was an eventful year and, in many cases, a difficult year for brokers. Tighter regulations, lower transaction volumes and changing trends rocked the industry in 2019.

In the wake of all of these changes - which regions benefited the most and which ones suffered the most?

The rise of offshore brokers

In August 2018, Europe was hit by a series of ESMA regulations that reduced the leverage of CFDs for individual traders, and that placed restrictions on trading and more.

These regulations pretty much forced individual traders to look outside of Europe to be able to invest with higher levels of risk, and therefore, higher potential profits.

Seeing this movement, many brokers have followed the demand and created offshore entities which allow traders to enjoy more leverage and not be subject to EU rules. The preferred destinations were Vanuatu, Belize and the Bahamas.

The Bahamas is now brokers' preferred destination

Tal Ron, head of Tal Ron, Drihem & Co. and Genia Gurevitz, who directs banking and payment services at Tal Ron, Drihem & Co, said: "In the past year , the regulatory wind has changed direction, forcing our biggest clients operating under the sought-after regulations of ASIC, FCA and CySEC to change and diversify their action plans. Australian and European brokers have started operating in less strict jurisdictions that allow them to better manage their affairs, such as Estonia, Vanuatu and the recent Holy Grail: the Bahamas."

"This, given that self-regulated financial trades, recorded in the Marshall Islands (still popular), or in Saint Vincent (which were common a few years ago and have practically disappeared since) are very problematic nowadays in terms of receiving traders' deposits (although payments are still possible)."

Offshore regions are increasingly legitimate

It is important to emphasise that a few years ago, going abroad was considered to be an indicator of questionable commercial practices on the part of a broker.

However, with the opening of more jurisdictions to brokers and the new rules which push them to leave Europe, offshoring is a more reasonable measure for a company than it was a few years ago.

"We have not encountered any wild and western behavior. The brokers who settle in these jurisdictions are very anxious to maintain their reputation, to give their traders good service and a good trading experience, and so they are long term," say Tal Itzhak Ron and Genia Gurevitz.

"In addition, reliable brokers have not only migrated for industry-related reasons. For example, ASIC-regulated operations have migrated because of the political and public opinion changes that have taken place; in practice, nothing has changed for these brokers in their way of operating, because working in a highly regulated environment is already part of their DNA."

Brexit and ESMA: the struggles in Europe and the UK

Many industry observers will not be surprised to learn that last year, traders and brokers moved away from these regions, more than they have come in droves. Harsher ESMA rules and an increasingly difficult environment have all led to this change.

The effect of these changes can be seen by examining the financial performance of some of the major brokers in the region. The main brokers all faced low forex trading volumes, which weighed heavily on their earnings.

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



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