Cyprus (and other EU) Forex brokers are not just relying on MiFID, but are getting licensed separately in the UK.
Two up-and-coming FX brokers, IronFX from Cyprus and Admiral Markets from Estonia, have separately announced that they have each received FCA authorization for their UK subsidiaries. (The FCA, of course, is the recently christened successor to the FSA). Both IronFX and Admiral markets are also regulated by ASIC in Australia, providing a base for the Asia Pacific region.
The FCA authorisation in the UK doesn’t really get these brokers something they already didn’t have. Both were (and remain) regulated by their home country financial regulator — IronFX by CySEC and Admiral Markets by the EFSA. And via MiFID, both have been able to take UK clients and/or open UK offices until now, had they so chosen.
So why the extra layer of regulation?
The answer is less about rules and regulations, and more about marketing.
Since the Cyprus EU crisis broke many Cyprus-based FX brokers have been scrambling to reposition themselves as being based elsewhere. Despite the fact that no Forex client monies were harmed at all in Cyprus — and that several of Cyprus’ leading forex brokers have enjoyed healthy volumes in 2013 — the crisis did hurt Cyprus’ overall reputation as a Mediterranean financial center. For example, the dean of Cyprus FX brokers, FxPro (a member of LeapRate’s Approved List of global forex brokers), was already FCA regulated several years ago, but since the Cyprus crisis has taken steps to point out that its global headquarters are now in London, not Limassol, which is very front-and-center when you go to the FxPro Home Page.
But beyond Cyprus-avoidance, Forex brokers are discovering that clients are changing — especially coveted high-net-worth, more discerning clients. These trading clients are spending more time doing diligence before deciding on a broker, and for better or worse are more inclined to select a Forex broker which is regulated in the UK. (As a quick self-plug, we do a lot of work for such ‘higher-end’ investors, helping them select the right regulated broker in the right location).
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.