The following article was written by Jens Chrzanowski, Regional German Director at FCA regulated broker Admiral Markets UK.
Word has it that British PM, Theresa May, will trigger Article 50 on 29 March, marking the official commencement of the UK’s negotiations to withdraw from the European Union. Her plan is to achieve a “Hard Brexit”. What that really means, only time will tell—especially for our industry and the city of London, Europe’s de facto financial capital. But I’m not here to talk exclusively about Brexit today, I want to dig a little deeper.
Ten to twenty years ago there was a dream, a dream of a “Unified Europe”, in which companies from all member states would be able to conduct their business in any other member state. For the financial industry, this meant that if you were regulated in one country, you were regulated in all of them. It was hoped that the outcome of this plan would see the enabling of low-cost services across the EU.
EU Passporting, valid in EU member countries and the three members of the European Economic Area (EEA), still exists, and may continue to do so even after Brexit, with the UK potentially being offered a special agreement. Regardless, the trend of an increasingly harmonised Europe no longer appears to be a reality.
Week by week we’re seeing increasing levels of ‘independence’ from national regulators. For example, last week the Spanish regulator announced information regarding new mandatory risk warnings, which may even be displayed within trading platforms and in order windows; the UK regulator is still planning their leverage limitations for retail clients; and the Cyprus regulator has already implemented new, stricter rules. The German regulator is also expected to have their say on this matter soon.
But what about the idea of cross-border business? Offering your trading services to the entire Union. How can this work if every single country now has its own obligations, rules and regulations? Unfortunately, it’s not so simple anymore.
As I’ve already pointed out in my other articles for LeapRate, we’re big fans of regulation here at Admiral Markets. We even request more of it. As long as it’s logical and fair, regulation is a very good thing!
But sharing equal views is an important element of the EU that shouldn’t be lost. There should be a universal norm, a common standard for all EU member countries, not twenty plus single interpretations of how best to protect consumers.
Do British, French or Dutch clients need a different level of protection to a German or Irish client?
The idea of the European Union is, from an economic viewpoint, to offer one product or service, which is scaleable to all countries. Low costs, equal parameters, but with the same standards. With too many different styles or models, the business is no longer scaleable and the costs for all (including clients) goes up.
Don’t get me wrong, consumer protection and the clarification of both the opportunities and the risks, is a standard we love to see and shouldn’t only be confined to Europe. But twenty variations of one thing? Is that ever helpful? Too many variations of such regulations will lead to higher costs for everyone. At the end of the day, the client is the one who must carry those costs.
Another scenario could see those clients leave in search of ‘offshore’ brokers, who operate in a world of almost no regulation (sometimes absolutely no regulation). The online age has no borders, unregulated brokers can easily be found in just one or two mouse clicks.
One European Union, with one high standard of consumer protection – I don’t know about you, but I still believe in that dream! Whatever you think, this year will undoubtedly be the year that sees new regulations for our industry. Let’s hope we’ll see some logical, fair standards put in place… But, please, let them be harmonised standards!
Do you have feedback, concerns, requests, maybe even compliments? I’d love to hear. Please contact me via: [email protected].
Trading on margin carries a high level of risk, and this article should not be seen as advice or solicitation to buy or sell, but written for informational purposes.