For many decades, London has held itself above all cities as the world’s largest financial center, dominated by the banking heavyweights and the FX industry’s long-established institutional businesses.
For retail firms, the prospect of operating from London was always an expensive one, and subsequent to Cypriot regulatory authority CySec being included under MiFID’s regulatory passporting rulings which allow companies established in Cyprus to operate across the entire European Union, Cyprus quickly became a hub for companies wishing to pay very low corporation tax, and have a relatively quick establishment process.
Liquid Markets, a company which has embarked on a growth phase from its Cyprus base, is the latest company to demonstrate that for some retail FX firms, the attraction of London is worth the extra costs.
Today, CySec has announced that Liquid Markets has renounced its CySec license altogether, putting paid to any idea that its gaining of a license from the Financial Conduct Authority (FCA) in London was in order to add another office, instead, along with a redesigned logo which includes the words United Kingdom, clearly showing that the company is relocating its operations to London.
Liquid Markets stated in May that its traders will have their FX trading accounts backed up by the UK Financial Services Compensation Scheme (FSCS), which provides a guarantee of up to £50,000 ensuring a high level of protection for their funds. All funds will also be held in a triple A rated depository UK bank and segregated from the broker’s own funds, as well as far higher penalties imposed on transgressors by the British regulator.
Liquid Markets is among some of Cyprus’ most established brokerage firms which have also obtained FCA licenses, some such recent examples being Iron FX which has established FCA regulated office in London, as part of the firm’s extensive expansion into worldwide markets, and Admiral Markets which headed for the financial powerhouse of London last summer.
Under the MiFID passporting system, brokers with CySec regulation are issued with an FCA registration number, in order that their products and services can be legitimately sold to British clients.
The reality is that the vast majority of firms in Cyprus do not have a large British client base, hence the prevalence of MetaTrader 4 as opposed to spread betting and CFD platforms, but instead realize the importance of the reputation and customer protection offered by providing clients with products that are overseen by European and British regulators.
Indeed, the lion’s share of FX business conducted by Cypriot brokers is in the Asia Pacific region, the Middle East and Russia, regions in which traders have great trust in the British regulatory system, thus the relocation for Liquid Markets may well be a shrewd one.