It is a rarity that we hear about a brokerage getting registered and regulated in a country outside of the typical European regulatory destinations. We frequently hear about a new broker getting regulated by the U.K. Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC) or the Malta Financial Services Authority (MFSA).
With the assistance of consultancy company Archer Consultants, the newly-formed broker Matador Prime has officially gained MiFID regulation through using a relatively unpopular destination. The company got licensed by the Bulgarian Financial Supervision Commission (BFSC) about 6 months after it started the application process.
Licensing by the Bulgarian Financial Supervision Commission could take about 6 months after the application process starts
Commenting on the matter, the Founder and CEO of Archer Consultants, Lior Shmuely, said, “Previously Cyprus (CySEC) has been the jurisdiction of choice for brokers seeking European licenses. Archer Consultants is proud to make a breakthrough with a legitimate alternative to a license in Cyprus with significant advantages to the broker.”
A 10 Percent Flat Tax Rate and Low Running Costs
Exploring the advantages of getting regulated in Bulgaria is a fairly straightforward task. The regulatory and setup fees are much lower when compared to other European jurisdictions, starting at €3,500 for the application fee with the BFSC. For a MiFID license that can be passported around the European union the cost is minimal.
The running costs of a brokerage in the country are approximately 20 percent lower than in other jurisdictions
Liquidity Constraints in 2021 – What is the Best Path Forward?Go to article >>
According to Mr. Shmuely, the running costs of a brokerage in the country are approximately 20 percent lower than in other jurisdictions that provide access to MiFID regulation.
Granted, the reputation of the country as a regulatory hub has not been as solid as in the U.K. for example, however, recent events across the continent have proven that some other regulators in the European Union have also been missing important information when it comes to the business conduct by some MiFID regulated brokers.
Another advantage when compared to other European countries is the relatively low costs of operation and the flat 10 percent corporate tax rate. The country has an abundance of multi-lingual talent available and a number of brokers have been outsourcing their support and sales departments to Bulgaria, including some well-known publicly listed companies from the industry.
Asset Management and Brokerage License at Once
In the case of Matador Prime, the company also benefits from the lack of a requirement by the BFSA to get a separate fund manager license. The company offers brokerage and asset management services to institutional investors and high-net-worth individuals, instead of retail investors.
A number of Bulgaria-based companies which are behind brokers such as Benchmark Finance, Deltastock, Trading 212 and Bulbrokers have been regulated by the BFSC.
Last year, the Bulgarian regulator undertook a procedure of license revocation of an entity known as Global Markets Ltd. The brokerage breached the financial regulatory law on numerous occasions and according to the regulator, on a systematic basis.
The main challenge for companies willing to get regulated in the country is the confidence of outside investors of the regulator’s ability to look after their interests. With the unification of Europe, the trust in different regulatory bodies across the continent varies primarily due to corruption and the ability of some Eastern European governments to provide a friendly business environment.