LeapRate Exclusive… LeapRate has learned that London based FX liquidity and prime brokerage services provider IS Prime has become a prime (no pun intended) beneficiary of the new ESMA Negative Balance Protection rules, with the company experiencing a surge in business from Cyprus based clients following regulator CySEC’s ruling on both 125k (i.e. matched principal) and 730k license category brokers.
CySEC has recently ruled that:
measures such as high margin calls and automatic stop out levels, low and intraday trading activity, monitoring leverage limits before major events are not adequate measures to comply with NBP [Negative Balance Protection] and still remain as a CFD CIF operating under a 125k Limited License.
As a result of this, IS Prime said that it has seen a significant rise in the number of CIFs seeking an LP able to offer these guarantees down to an individual retail account level.
Raj Sitlani, Managing Partner of IS Prime said to LeapRate:
With the 14th September deadline rapidly approaching, we have seen a major uptick in the number of firms we are onboarding from the region, as well as an increase in trading volume, with a number of CIFs moving to IS Prime as a sole Liquidity Provider. This has been due to our ability to deliver the solutions required by their regulator, alongside extremely competitive commercials.
CySEC is apparently concerned that brokers, whether licensed as 125k or 730k, have increasingly been trading with LPs that are “domiciled in jurisdictions that do not have an adequate prudential regime.” To combat this, any broker trading with a counterparty that is not either based within the G20 or on a defined list will be required to have a further “1) €2.000.000 or 2) equal to 2% of their total risk exposure, whichever is the higher” on their balance sheet.
According to Raj Sitlani,
This move has further pushed CIFs towards the “Tier 1” Liquidity Providers and away from offshore entities.
IS Prime provides institutional clients with multi-asset execution across Tier 1 aggregated liquidity venues together with Prime Brokerage services and cutting edge front to back technology. The London-based firm is part of ISAM Capital Markets, which also includes IS Prime Hong Kong and IS Risk Analytics.