The new regulatory changes across the retail FX and CFDs trading industry is now upon us and with those, so are the ways in which companies are preparing to address a tougher market environment. Brokers have received a hard deadline for the implementation of the new ESMA regulatory requirements and the date is the 1st of August.
With a little less than two months remaining, Finance Magnates has started interviewing some executives in the industry about their plans to tackle the toughened EU regulatory regime. In a first of a series of interviews, we speak with Alex Pusco, the CEO of ActivTrades.
How is the new regulatory framework going to reshape the industry in the coming months?
There have been a plethora of global regulatory proposals in recent months and ESMA’s temporary decision to reduce the leverage available on CFD and binary options products is the latest move.
ESMA’s intervention, which takes effect 1st August 2018, strives to protect traders in the market, by effectively decreasing the amount they can borrow to increase their exposure on a given position. Therefore, traders will be required to stake considerably more of their own money to trade. For example, currently, 1 lot of EURUSD only requires a margin of 250 Euros, post-ESMA, this increases to 3,333 Euros.
The proposal will undeniably change the current landscape of the market and ActivTrades fully welcomes any regulatory changes which aim to protect clients and improve the integrity of the industry, by protecting less experienced traders.
However, some traders may resort to opening accounts with unregulated brokers to keep a higher leverage. This is arguably counter-productive, as it removes many of the safeguards regulated brokers like ActivTrades provides, such as negative balance protection, funds’ insurance and the requirement for all client money to be held in a segregated account.
We will also see more traders opting to be Elective Professional Clients. By doing so, some eligible clients will have access to a higher leverage post-ESMA. ActivTrades’ Professional Accounts allow clients to trade with 1:400, whilst still benefitting from the same advanced safeguards as individual clients.
How do you intend to attract professional clients in an environment where the market is highly saturated?
There is often a misconception that the market is highly saturated, but this is not the case at all, in fact, we are just at the beginning. Many traders, who could potentially meet the Elective Professional Clients criteria, are using very traditional, antiquated institutions to trade the markets, often still placing orders over the phone.
We intend to show this segment of the market the complete high caliber of products and services we offer and the real difference we can provide to their trading experience. We want them to discover how advancements in technology have made trading more accessible and convenient.
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For example, Investors can open positions on trading platforms like ActivTrader, in any location with an internet connection using their mobile, tablet or desktop. We have invested heavily in further developing ActivTrader to incorporate the very best elements for today’s traders and we expect to release the latest version July 2018.
We will communicate that our values remain unchanged and at the center of our operations: excellent customer service available in 14 languages, fast execution across all our platforms and enhanced client protection. In addition to the range of safeguards we provide, our funds’ protection up to £1 million in excess of the FSCS insurance will be particularly beneficial to this untapped segment, as they are often high net worth individuals.
What are the best ways for brokers to diversify their exposure to the ESMA regulations in the current market environment?
ESMA has caused quite a furor in the media, which has ironically raised awareness and interest about financial trading for retail clients, who perhaps knew little about it prior to ESMA’s decision.
In this current climate, diversifying should be the foundation of any credible brokers’ strategy.
It is imperative to ensure that the products, services and the experience provided, surpasses that of a traditional institution to best attract new markets. This will be achieved by assessing the markets’ pain points and solving them better than the competition, again, with unrivaled service or advanced technology.
Brokers should also expand beyond Europe and penetrate emerging markets such as the Middle East, South America, and South Asia. There is an increasing demand for trading services in these regions, which ActivTrades has experienced first-hand after opening an office in the Dubai International Finance Centre (DIFC) 15 months ago.
It is also important to ensure that there are popular and competitively priced products for clients to trade. Our Support Team regularly takes feedback from clients about what products they would like to see on our platform, whilst our Risk Department diligently observes industry-wide product releases and introduces instruments which are suitable for our clients and In line with our values.
How do you see the new VISA/Mastercard requirements on forex broker transactions affecting the market?
As with the proposals made by ESMA and recent advertising bans by Google, ActivTrades welcomes the latest change from MasterCard. New categories will establish a stronger framework in the industry and flag high-risk firms, further protecting clients and their funds.
What was your main strategy to prepare for the new regulatory environment and why?
We are a proactive organization which forecasts and prepares for every eventuality. Our key objectives have not changed and our business continues as usual.
Our plans remain the same, to launch our enhanced platform, ActivTrader, to our growing international client base. We will also continue to promote our Professional Accounts targeting existing and new market segments. Finally, we will provide the same award-winning support, fast execution and all round excellent service, as we have for nearly 20 years.