The Question on Every Forex Trader’s Lips is, Can you Trust Cyprus Forex Brokers?
To put it in simple terms, you want to know if you can trust Cyprus forex brokers because of the sheer number of forex brokers (not to mention binary options brokers) based in Cyprus.
1. It all started with Cyprus joining the EU. Like most island nations with limited economy size, they needed something to stand out and attract businesses. Malta ended up getting Gambling operators and Cyprus with Forex Brokers.
Being in an EU nation, Cyprus brokers can market anywhere within Europe. The regulator, is professional and unlike the perception it is quite strict with its rulings as well. However, willing to listen and understands the ever changing environment of Online businesses. And then, once an industry starts growing, other tend to follow because of availability of experienced Forex professionals and legal firms that understand forex well.
2. The main reason for brokers to choose Cyprus are the low fees and taxes. Some brokers are regulated by CySEC because of its easy regulations. Cyprus is very near to Europe where regulations are quite easy to follow. This attracts many companies to setup an office in Cyprus. Getting through regulations is not an easy task in Europe and USA. There are a lot of strict rules which forex brokers find very difficult to abide considering the nature of the business. So Cyprus remains the best choice for broker companies.
3. Retail Forex Brokers are running out of jurisdictions to operate out of. The United States has regulated out most brokers since they instituted the $20 Million net capital requirement.
The UK has been the default but is now in question since FCA will change with Brexit and many of the EU regulations will change as well. It is also uncertain if passporting of EU regulations will still be in place.
Australia has been reluctant to add more brokers and has been cracking down. No new brokers have been approved over the past couple of years.
CySEC has been a popular jurisdiction for regulation for both Binary Options and Forex. There might be changes for Binary Options Brokers soon since there have been many complaints against CySec regulated Binary Options Brokers. Expect to see more transparency on Binary Option pricing and a possible reclassification of Binary Options as a product.
Should CySEC Killing Bonuses and Slashing Leverage to 1:50 make you Trust Cyprus Forex Brokers More?
The Cyprus Securities and Exchange Commission today issued a new circular that is introducing some changes to some key broker regulations. The financial watchdog is introducing some changes in line with the latest update to the European Securities Markets Authority (ESMA) Q&A relating to the provision of CFDs and other speculative products to retail investors under MiFID.
As reported by Finance Magnates in the middle of October, companies operating across Europe will be forbidden to use bonus promotions related to trading activity in order to market to their clients. CySEC has updated Cyprus Investment Firms (CIFs) on the matter and is stating that the the practice exposes investors to unnecessary risks.
CySEC said in a statement: “It is expected that CIFs have already assessed in depth the ESMA Q&A and took, or are in the process to take, appropriate measures and actions in order to operate in line with the Q&A.”
CySEC Chair Demetra Kalogerou elaborated that companies are frequently not acting in the best interests of their clients, a practice that she called in a media statement “not acceptable”.
Leverage to Default to 1:50
Another major point in the circular that has been sent out to companies from the industry is some changes that are being made to the ways that brokerages are providing leverage to their clients. The CySEC has mandated the industry to default the leverage choice of new clients to 1:50. This new requirement for CIFs is not a cap on leverage.
Only clients that explicitly ask for higher leverage can be presented with an appropriateness test, that will determine whether they are suitable to trade with lower margin requirements.
The companies will also have to adhere to the MiFID regulation that has already been highlighted by Finance Magnates about same day withdrawal requests. Only requests that are received outside of business hours can be executed on the following day.
Companies from the industry will have until the 30th of January 2017 to implement all of the necessary changes, which will include asking existing clients what level of leverage they are willing to trade with. This is provided that they pass the ESMA test, which the CIF has to provide them with and keep the records.
The circular elaborated on the final term to implement the changes: “In case where a CIF needs to amend its trading system so as to be in line with the provisions of the Q&A and of this circular, this should be done the soonest and not later than two months from the date of this circular (30 January 2017).”
Whether this will help forex traders trust Cyprus forex brokers, is still to be seen.