The following guest post is courtesy of CySEC and FCA regulated retail forex broker FxPro. FxPro is one of the largest Cyprus-based Forex brokerages, operating since 2006.
We’d note that LeapRate broke news of CySEC’s directive against linking Broker pay to volumes, deposits or client P&L two weeks ago. We will continue to bring our readers reaction to the new directive, which we believe may reshape the Forex industry in Cyprus, and how brokers compensate their workers.
CySEC’s Advice on Remuneration Policies: A Step in the Right Direction
A recent directive, issued last week by CySEC, reminded CIF licensed companies of acceptable remuneration policies, advising against practices that may potentially create conflicts of interest between brokers and clients. For online broker FxPro, this step was not only long-awaited, but also long overdue.
According to the Cypriot regulator, a number of brokers associate employee remunerations with client registrations, deposits, volume traded or transactions, despite the extent to which such practices are not in line with the conduct of accepted business rules. As CySEC highlights, practices like these whereby the employees are given such client-related incentives are likely to result in the potential detriment and unfavourable treatment of traders.
For FxPro, the very existence of any such correlation between employee remuneration and client retention or trading is both irrational and potentially damaging. ‘Relating employee remuneration to client deposits, volume traded or even losses, can be very harmful and is surely not the right approach to follow,’ says Mr Charalambos Psimolophitis, FxPro CEO.
At FxPro there was never any association between employee remuneration and any client statistics since such an approach would work against any commitment we have ever made to operating in our clients’ best interests.
FxPro has long advocated the adoption of fair trading practices and high ethical standards by all industry participants, supporting that transparency and credibility are both vital if the industry is to enjoy a successful future. Indeed, the broker has invested heavily in adopting a client-centric approach and a business model that revolves around traders’ needs and demands.
‘Yet, it is worrying,’ says Mr Psimolophitis, ‘to think of the impact that such practices may have on not only the performance and reputation of a single company, but the performance and reputation of the industry as a whole.’ Encouraging employees to resort to devious tactics, whereby a trader’s loss is an employee’s gain, ‘is essentially the point at which a brokerage is reduced to nothing more than a boiler room.’
The CySEC directive, then, is definitely a step in the right direction. ‘We definitely hope to see the widespread adoption of fair and ethical standards of service soon,’ Mr Psimolophitis says, ‘since, such a move, would not only strengthen the reputation but also ensure the longevity of the industry.’