This week was an interesting week for the Forex and cryptocurrency industries. So let’s take a moment to see what the most interesting stories of the past week were, in our latest best of the week analysis.
Retail brokers keep avoiding FX global code
Two years ago the Foreign Exchange Global Code of Conduct was published and, thus far, only three prime of prime brokers, out of the forty-six that signed up to it, have agreed to follow the rules that the code puts in place.
That is despite widespread adoption of the code in the institutional trading world. In fact, many buy-side firms are now only dealing with companies that have agreed to adhere to the code.
Will there be any change in the retail space? Don’t count on it.
The crypto-sceptic who launched a cryptocurrency
Despite company CEO Jamie Dimon famously saying that bitcoin is a “fraud,” JP Morgan is now moving ahead with plans to launch its own cryptocurrency.
The JPM Coin is still under development according to the investment bank but it plans to launch the cryptocurrency, which will reportedly be pegged to the US dollar, later this year.
Crypto enthusiasts will likely be disappointed to know that they won’t be able to access the new cryptocurrency. Reports suggest that the tokens will only be available to large, regulated institutions.
JP Morgan will likely use the coins to make international payments and securities transactions and perform treasury functions.
Is QuadrigaCX the new Mt Gox?
Though you may have mistaken it for a Kafka novel, Quadriga CX is actually a cryptocurrency exchange.
Traders have been unable to access their funds for months and, after the company’s CEO mysteriously died in India, there have been reports that the company cannot access its cryptocurrency holdings as only the now-deceased CEO was able to.
Reports this week indicate that the company may not even have the cryptocurrency that it said it did. Meanwhile the Nova Scotia Supreme Court in Canada, where the exchange is based, has granted the company credit protection.
Where do things go from here? Nobody knows.
Plus500 shares tank as management signals ‘materially lower’ profit
Despite raking in over half a billion dollars in revenue last year, Plus500’s stock plummeted on Tuesday after the company released its financial report for 2018.
A crash in the demand for cryptocurrency trading, which massively bolstered revenues at the beginning of last year, meant the firm’s revenues in the second half of 2018 were 45 percent lower than in the first half of the year.
The firm also said that it had only managed to reclassify 44 percent of applications for professional trader reclassification. Plus500 had banked on maintaining strong revenue levels by ensuring its biggest spending clients were reclassified as professional and hence immune to ESMA’s product intervention measures.
All of this clearly left investors spooked and, though Plus500 isn’t going to crash anytime soon, it will be interesting to see how the broker fairs in the new, post-ESMA world.
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Who will become Europe’s Robinhood?
With the success of Robinhood in the USA, ESMA’s rules biting in Europe and growing demand for equities trading from European traders, the race is on to offer commission-free stock trading in the Old Continent.
Thus far, no one has definitively cornered the market or offered an extensive equities trading service.
Retail broker BUX does have plans to launch such a service, called STOCKS, in the next couple of months but it won’t be the only firm.
As brokers start to offer more products to mitigate the effects of leverage caps, we’ll probably see an array of commission-free equities trading platforms in the near future.
The FCA, RBS and the curious case of Ortner Marcus
Listed on the FCA’s own website, Ortner Marcus was, until Finance Magnates contacted the British regulator last week, able to provide its services in the UK.
The problem is, no one seems to know who or what the company is. Moreover, the Companies House number listed on the FCA page connects to a Caribbean restaurant in Newcastle.
The FCA claims that the company was regulated in Austria but Finance Magnates found that, not only was it not regulated there, no company called Ortner Marcus was ever registered in the country.
Scammers have been using the company’s name to trick people into parting with their cash and, one victim of those fraudsters, sent money to an account with the Royal Bank of Scotland.
Despite almost certainly knowing who owns that account, RBS refused to comment on our story or help the victim of the scam get his money back.
BUX in exploratory talks to buy UK subsidiary of ayondo
Mobile-only brokerage BUX is in talks to buy the UK subsidiary of Ayondo. The news comes as BUX attempts to launch its own commission-free equities trading application.
Speaking to Finance Magnates, the two firms said that they had signed a non-binding Head of Terms document earlier this month.
“After the integration of Ayondo UK’s technology and operations, we will be able to serve our customers even better and make it easier to introduce new features more quickly,” said BUX CEO Nick Bortot.
If the deal does go through, it will need the FCA’s approval. In the meantime, the two companies are working closely together to see whether a deal can be brought to fruition.
Brokers think they’re bypassing ESMA restrictions, but here’s where they go wrong
In the run up to August of last year, Finance Magnates predicted that there would be a move to ‘professionalise’ the trading industry as brokers sought clients who, by reclassifying as professional, would not have to adhere to ESMA’s product intervention measures.
Research by Konstantin Rabin found that many brokers were happy to perform this reclassification without meeting any of the regulatory standards needed to make the change. Rabin also found that many brokers were extremely eager to redirect clients to offshore subsidiaries which would allow them to trade with high leverage.
Arguing that this state of affairs is a form of short-termism, something the retail industry is a big fan of, Rabin says that educational efforts, such as the training course offered by Admiral Markets, are a better way of creating a well-informed base of traders that can offer long-term support to brokers.