Exclusive: FCA Requests Broker Data to Assess Impact of ESMA Restrictions

Brokers received a package of 46 questions relating to their business before and after ESMA's new rules.

The Financial Conduct Authority has requested a significant chunk of data from brokers, several UK regulated companies confirmed to Finance Magnates. The FCA is starting a “thematic review” of the sector just over three months since the introduction of the new EU regulatory framework.

Firms have been requested to provide datasets related to the introduction of the new leverage cap, specifically detailed data from before and after the introduction of new ESMA rules. The FCA’s aim seems to be to assess the impact of the new restrictions on brokers.

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The goal of the FCA and European regulators have been consumer protection. That said, clients of European brokers have been keen on moving to offshore jurisdictions and other alternatives. While EU law doesn’t explicitly forbid that, some regulators have been actively discouraging such steps.

FCA Data Request

As far as the information request sent to brokers goes, firms received 46 basic questions. Those include data on several aspects of a broker’s business.

The list starts with data on total client numbers and the value of total client funds. Active clients open in 2017 and 2018 with the three post-ESMA months in focus (August, September, October).

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Total volumes, trades, exposure, and a breakdown on professional vs. retail clients are also in the list of information requested by the FCA. The UK regulator continues with a ratio of profitable to losing accounts for the three months in 2017 and 2018.

All in all, brokers have had to supply a massive piece of data to the regulator. There is no clear message from the FCA what it intends to do with the data, but the speculation is already out there.

Despite the overwhelming realism of many market participants that the data is largely to serve the FCA to assess the effectiveness of its measures, some are speculating a change to the “temporary” nature of ESMA’s measures may be in store.

Professional vs. Retail Clients

The FCA is also requesting the nominal total profits of both professional and retail clients. It must be interested in any difference between the brokers’ customers which chose to stick to higher leverage and those which are stuck in the new regulatory environment.

All of the data which retail brokers are to submit to the FCA includes a breakdown of professional vs. retail clients. The likelihood that other brokers across the EU will be asked to submit similar data by their own regulators is significant.

While Cypriot brokers have not reported on something similar as of yet, the CySEC has switched to a stricter regime in the past couple of years. Other regulators are likely to be examining measures focused at companies operating in their respective jurisdiction. That said, the ESMA has not made any announcements so far.

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