It’s been about ten days since the UK Financial Conduct Authority issued an announcement that delivered some long-awaited regulatory clarity for the industry. Coincidentally or not, on December 11, UK-based brokerage Formax Prime published an announcement on its website stating that it is closing its doors.
Finance Magnates spoke to a customer service representative from the company who shared that the move was a “management decision.” The tough regulatory times for the industry started in August after the introduction of the new leverage cap across the EU.
The ESMA’s move caused a massive decline in trading volumes especially for firms which have no professional clients. The rising costs of acquisition and compressed margins leave some companies little choice but to close down or move offshore.
In the case of Formax Prime, the company doesn’t appear to have an offshore-regulated subsidiary. The closure of the firm’s operations comes only three years after the firm acquired its FCA license.
Earlier this year in May, the brokerage announced that it is launching Chinese and Spanish versions of its website. The effort to diversify its client base appears to have not been successful enough to warrant the continuing operation of the company.
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The message on the website of Formax Prime has been made only a couple of days after the FCA’s publication about the permanent restrictions to CFDs trading.
The move serves to prove that some industry participants have been caught ill-prepared. As Finance Magnates repeatedly communicated, there has been little doubt among experienced industry professionals about the serious intention on the part of the FCA to curb retail forex and CFDs trading.
The official goal of the new regulatory measures on the part of the ESMA this year has been “client protection.” The UK FCA highlighted in its announcement at the beginning of December that it intends to reduce the amount of money which UK retail clients lose while trading with high leverage products.
According to the FCA, the measures taken by the UK regulator would save retail clients between £267.4 and £450.7 million.
Finance Magnates reached out to Formax Prime for a comment on the closure of the company. No official response has been received at the time of publication.