CySEC working to free client funds at Cyprus FX brokers

Central Bank of Cyprus has agreed to not haircut segregated bank accounts over €100,000, where the ultimate beneficiaries are small individual investors.

LeapRate Exclusive… LeapRate has learned that Cyprus’ financial regulator CySEC is working on behalf of licensed Cyprus investment firms, which include many FX and Binary brokers, to prevent the dreaded “haircut” on bank accounts holding segregated retail client funds at either Laiki Bank or the Bank of Cyprus.

The Central Bank of Cyprus has agreed not to apply the “haircut” to bank accounts over €100,000, where the ultimate owners of the cash in those accounts are individual investors, each with less than a €100,000 interest in those accounts. And this is certainly the situation at virtually all retail FX and Binary brokers — each trader typically has between €1,000-€25,000 in an account at any time, while the funds of all clients at a specific FX or Binary broker are typically held in one, large segregated account, which will have millions Euros in it at any point in time.

CySEC sent a circular out yesterday to its regulated firms (click here for a copy in English) pointing out that those firms with bank accounts potentially subject to the haircut should provide “supporting evidence for the ultimate beneficiaries so as to allow the release of the money…”

The haircut / confiscation at Bank of Cyprus will amount to 60% for all bank accounts of size €100,000 and larger, while those at Laiki Bank will be even greater, possibly all the monies held in those accounts.

Several Cyprus FX brokers have put out statements assuring clients that “all is well”, ranging from:

FxPro, Cyprus’ largest FX broker, which only uses “global banks of investment grade standing for segregated client accounts (currently Barclays UK and Credit Suisse Monaco)”,

Windsor Brokers, which wrote that it was “part of the… group of brokers [which] either had enough funds or all of their funds outside Cyprus. One of our main Risk Management Policies is to keep clients’ and Company’s funds in a number of first-class banks distributed over a widespread geographical area…”

Exness which wrote that “In the event that funds are written off… the company will compensate for the funds from its own reserves.”

So far, no Cyprus FX or Binary brokers (to our knowledge) have acknowledged any serious operational problems or inability to honor clients’ trading or withdrawal requests. Will this continue? Stay tuned to LeapRate…

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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