HFT Brokers Exits Forex Business Citing Polish Cap Requirements

Finance Magnates has learned that HFT Brokers, the Polish retail brokerage house, has decided to leave the domestic foreign Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term market. The company wants to develop other, more profitable parts of its core business.

The first rumors of this emerged on Tuesday, October 18, when another Polish brokerage, X-Trade Brokers (XTB), published along with its quarterly results an official press release announcing unsuccessful negotiations regarding HFT’s customer base acquisition.

This information caused quite a stir in the local industry. HFT Brokers is among the biggest brands in the Polish FX market with some 10,000 accounts and a few thousand active clients. However, it initially responded only on a local forum, providing an extensive explanation.

The statement goes in detail into its sweep entry to the market, curbed by increased regulatory demands.

"Regulatory cap requirements have forced the brokerage house to maintain very high amount of funds (owing to an increase in transaction volumes)."

"From January to September 2016 FX business has translated into revenues of about 2 million zł ($500,000), with capital of about 5 million ($1.2 million). According to our analysis, developing forex in 2017 would need a capital increase to about 40 million zł ($10 million)."

Following Finance Magnates' inquiry, HFT Brokers provided the following statement:

"The Management Board has found that the FX offering is economically inefficient and fraught with high risk of uncertainty regarding future performance. Accordingly, the HFT Group SA, the owner of HFT brokers, in consolation with the Board has departed from the planned capital increase of the brokerage house."

Indeed, HFT Brokers has decided to remodel the company’s development strategy, defining new areas of activity and business expansion. Factors of the said "uncertainty" would be, then, regulatory changes, the new capital requirements forcing maintenance of higher reserve funds and other stipulations imposed by the Polish market watchdog, the KNF.

At this point, HFT intends to focus on other lines of its core business that last year generated 11 million PLN revenue. According to the company's plans for 2017-2018, it will focus on business in other assets and activities, such as equities, bonds, treasuries, private banking, investment funds and custody services.

The firm believes that by offloading the brokerage business it will be able to multiply its profits without increasing capital commitments. That could prove vital if it goes back to the FX market in the future.

Currently, the brokerage is negotiating terms to maintain the continuity of transactions for its existing customers. Its FX offering is planned to expire before November 30, 2016. HFT Brokers said that before this date it will try to find a new partner to take over its current customer base.