Breaking: XTB to Exit Turkish Forex Market

New regulations contributed to a considerable decline in the number of customers and activity of XTB Group in Turkey.

After the decision made in February by the Capital Markets Board (CMB) of Turkey, which introduced a number of limits to the forex market, Polish FX brokerage XTB is exiting the Turkish market, and will be withdrawing its registration with the CMB, according to a corporate statement.

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XTB stated earlier that it expects that the CMB initiative will significantly reduce overall activity in Turkish retail forex trading.

Earlier in February, the CBM introduced amendments in leveraged forex trading transactions. The board brought a minimum margin of TL 50,000 ($13,840) and the leverage was rearranged as 10:1. Previously, before the amendment, it was 100:1.

According to XTB, these drastic changes to the regulatory structure have contributed to a considerable decline in the number of customers and consequently to a significant reduction in the activity of XTB Group in Turkey.

XTB’s decision to withdraw from this market was also based on the recent economic and political situation in Turkey which, in the company’s opinion, has also affected the business environment and triggered uncertainty in this market.

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Highlighting the financial impact

According to information from the XTB website, the decision to shut down its Turkish subsidiary will affect the current financial situation. Specifically, it will require that the value of the shares of its Turkish unit be written off, which equal PLN 9.7 million ($2.55 million).

Furthermore, the company intends to separately create another write-off of the value of its intangible assets to reflect the shutdown of its brokerage activities license in Turkey. This amounts to approximately PLN 5.6 million ($1.47 million).

Last month, we interviewed XTB’s new CEO Omar Arnaout and when asked if the company plans to keep operating in Turkey following the rigid new regulations, he answered:

“At this moment, unlike many other brokers operating in Turkey, we plan to maintain our branch. We are aware, however, that the current state of the CFD market may change dramatically. Due to the leverage reduction to 1:10 and the increase in minimum deposits to around $13,500, the customer profile will change from standard retail investors to significantly larger ones.”

Mr. Arnaout continued: “What is also important is the focus on cost optimization. In our own experience, we know that local customers have been used to lower leverage over the past few years and are keen on national regulation. As a result, we forecast that the largest customers will still be looking for Turkish companies that allow leveraged markets trading, and the consolidation of the industry may be used by us where we will probably be able to focus on more wealthy traders.”

But he concluded that although at this point they were not considering leaving the Turkish market, if the results of the assessment show constant and strong declines, this step certainly will have to be considered.

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