Saxo Inks Major Deal as Brokers Feel ESMA’s Squeeze: Best of the Week

It was an exciting last week before Christmas as Saxo Bank bought Binckbank, Citi lost $120 million and ActiTrades left

It’s been a bit rip-roaring past seven days, with huge crypto deals, brokers closing offices and regulation renewals. So before you wander off to eat turkey and celebrate Christmas, here are the most scintillating stories from the past week. Sit back and enjoy.

Citigroup shakes up FX prime brokerage division amidst fallout from $180 million loss

Reports on Wednesday suggested that investment banking giant Citigroup will be making changes to its prime brokerage business.

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An internal memo seen by Bloomberg and Reuters suggests that the company’s FX prime brokerage service will be separated from its currency trading division and moved to its prime financing and securities services business.

The news comes amidst further reports that Citi is about to suffer a $180 million loss stemming from a loan given to an Asian hedge fund which made some poor trades in the FX market.

Waves making waves

More craziness in the blockchain world this week as Waves Platform, a company that is fast emerging as a competitor to Ethereum, announced that it had secured $120 million in funding.

News of the deal saw the company’s cryptocurrency, Waves, increase in value by more than 50 percent. As of Friday, the token was trading at $4.11.

Dolfin, a London-based asset manager, was the main source of cash for the firm but private investors are known to have taken part in the investment round.

Thus far, Waves Platform has used its Vostok system to enable companies to launch initial coin offerings.

With a huge stockpile of cash in the bank following that round of investment, the company is going to start working on building private blockchains for corporations and government agencies.

ESMA bites

It’s been four months since the European Securities and Markets Authority’s product intervention measures came into effect and brokers in Europe are starting to feel the bite.

Volumes have been declining for European brokers, and we’ve started to see a mass movement of funds offshore.

But it’s not been bad for everyone. Finance Magnates’ research indicates that Australian brokers may be benefiting from ESMA’s regulation.

IC Markets and Pepperstone have both seen increases in trading volumes in the past twelve months. The latter broker’s volumes have been particularly conspicuous, with trading on its platforms increasing concurrently with a decline in European volumes.

Saxo Bank goes Dutch

The Danish trading firm Saxo Bank announced on Monday that it had acquired BinckBank, an online discount broker based in the Netherlands, for €425 million ($485.2 million)

As reported by Finance Magnates, the Danish firm bought all of BinckBank’s shares in cash, valuing each share at €6.35 ($7.25).

The move seems to be a result of stiff competition in Europe and the fallout from ESMA’s aforementioned product intervention measures.

In an effort to stay ahead of the pack and diversify out of FX and CFD trading, brokers are starting to offer stockbroking services.

Replicating the success of Robinhood in the US, Trade212 and BUX have both launched stock trading services for their clients.

Saxo Bank’s acquisition seems to be a move in the same direction, but they aren’t likely to be the last company to try their hand in equities. Watch this space.

Goodbye Dubai

Finance Magnates learned this week that retail broker ActivTrades had returned its license to the Dubai Financial Services Authority.

The broker has also shuttered its office in the Middle Eastern jurisdiction.

Speaking to Finance Magnates, an ActivTrades spokesperson said that political tensions had made doing business in the region more difficult.

At the same time, the spokesperson said, the broker is also trying to strengthen its European business and plans to expand in South America via its recently acquired Bahamas license.

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Dukascoin is go

After filing for regulatory approval for its cryptocurrency back in September, retail broker Dukascopy announced this week that it had been given the go-ahead by the Swiss Financial Market Supervisory Authority to put Dukascoins on the market.

The retail broker, which is based in Switzerland, will be launching two cryptocurrencies; Dukascoin and Dukasnotes.

The first of these is supposed to be a regular cryptocurrency which traders can also use as a form of payment and which the broker looks set to use as a reward for new customers.

It is less clear, for the moment, what Dukasnotes will be used for. Company statements indicate that it will act as a stablecoin akin to USDC or Tether.

Surprise Surprise

This week’s most expected news came on Wednesday when ESMA announced that it would be renewing its product intervention measures for another three months.

Implemented in August, the rules, which put caps on leverage and prohibit certain marketing practices, have to be renewed every three months by the pan-European regulator in order for them to stay in effect.

Almost no one expects that the regulator will ever stop renewing them and many national regulators have already taken steps to make the rules permanent.

Indeed, this Thursday, BaFin, the German financial regulator, announced draft rules that would see ESMA’s regulations becoming permanent in its jurisdiction.

Risk pays off

Given its reputation as being a minefield of scam artists, con-artists and wideboys, it’s unsurprising that most financial institutions have stayed away from investing in cryptocurrency.

But, as Finance Magnates reported this week, firms which did invest in digital assets made big returns in 2018.

Revenue declarations made by Metropolitan Bank, Silvergate Bank, Cross River Bank, and Signature bank all indicate the cryptocurrency payments can pay off.

Metropolitan Bank, for example, saw a 300 percent increase in crypto-related conversion fees and doubled its non-interest related income over the course of the third quarter of this.

Will these results encourage the JP Morgans of this world to start getting involved in Bitcoin? Don’t count on it just yet.

Trade.io heads to the Caribbean

Blockchain company Trade.io released more information regarding its plans to open an FX trading platform this week.

People that sign up for the service will be able to trade in more than 130 different CFD and FX instruments.

And, being the regulation-conscious people that they are, Trade.io will be launching its platform in that hub of financial activity – St Vincent and the Grenadines.

The new entity will be called TIO Markets and traders that sign up to use the service will be able to ply their trade on MetaTrader 4, MetaTrader 5 or PAMM.

Brokers feeling the squeeze

Speaking exclusively to Finance Magnates this week, Antelope Systems CEO Ori Hazan said that brokers in Europe are feeling the pressure from both ESMA’s regulations and payments providers.

Hazan also discussed some of the changes taking place in the lead management and customer relations industry at the moment.

With a broad base of retail brokerage clients, Hazan has a solid overview of what’s going on in the industry today.

Fixi out

Fixi PLC, a forex and CFDs broker, announced it would be shutting down this Friday.

According to the announcement, the broker decided on the closure after consulting with the FCA and professional advisers. The company requested that the UK regulator imposes restrictions on the company and its business.

After the FCA honored the request of the firm, it mandated Fixi PLC to immediately cease all regulated activities. The UK regulator will be allowing the broker to close any open positions it holds for itself or clients before the 28th of December.

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