Get Out! CySEC Bans FX Firms From Accepting Non-EU Clients
Cyprus today finds itself amid further controversy as its regulator sets an immediate ruling in place to prohibit the soliciting

Cypriot regulator CySEC has had its fair share of discourse this year, especially during the banking crisis in March which saw customers of the Cyprus Popular Bank and the Bank of Cyprus have their funds bailed in as part of the restructuring following insolvency.
This caused a tremendous stir among Cyprus based FX brokers and clients alike. The first time that banks have conducted such a means of rescuing themselves from financial oblivion, it set a precedent Europe-wide, leaving other EU countries wondering who is next. The industry settled down and moved on quickly, largely undeterred, however today CySEC has announced that it has implemented a new ruling which may have a potentially dramatic effect on how brokers in Cyprus conduct their business in the future.
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No More Non-EU Clients?
CySEC’s controversial ruling, which is effective immediately, stipulates that brokers which operate under the CySEC license and as a result comply with MiFID rulings allowing them to attract clients from all over Europe, including Britain, will no longer be able to solicit business from any jurisdiction outside of the European Union, unless a potential client of a CySEC regulated company who resides in a non-EU member state can provide written authorization from the domestic financial markets regulator in the nation which that person is resident that such a person or entity is able to become a client of a CySEC regulated broker.
In accordance with section 79(1) of the Investment Services and Activities and Regulated Markets Laws of 2007, as in force, the law states that CIFs may provide investment and ancillary services and/or perform investment activities within the territory of another member state and/or a third country, provided that such services and/or activities are covered by their authorization, the full detail of which can be read here:
http://www.cysec.gov.cy/Downloads/Circulars/2013/EPEY/Circular%20CI144-2013-22%20to%20CIFs%20-%20cross%20border%20services%20to%20third%20countries.pdf
As is to be expected, this is a move that has polarized opinions, and Forex Magnates discussed the matter with some senior industry figures based in Cyprus and representing the wider FX industry, with some highly interesting viewpoints proffered.
When asked by Forex Magnates if a drive toward applications for FCA licenses may occur, Mushegh Tovmasyan, CCO at Alpari UK explained that he believes that it makes sense to be based in a solid financial center such as London, and that CySEC’s responsibility is to protect its reputation in order to secure the nation’s financial sector’s future: “FX business is so tiny compared to the rest of financial industry there” Mr. Tovmasyan explained to Forex Magnates today.
“It is the same situation as in the US, insofar as that the authorities don’t want the FX business to tarnish their brand, which ultimately can damage the reputation of the country itself. Maybe thats the reason”.
“This will obviously be a mess for Cypriot brokers if it comes into effect and if it is actually enforced. Indeed it would be great news for non Cyprus brokers and a race against time for Cypriot ones” continued Mr. Tovmasyan. “Brokers cannot survive on European business alone in my opinion, and certainly not on a simple retail MT4 or equivalent business model”. Alpari ceased its Cyprus operations in December 2012, migrating its client base to the UK, a move which the company’s CEO Daniel Skowronski described at this year’s iFXEXPO in Cyprus as “purely strategic”.
Following the Cyprus crisis, the bailing in of depositors’ funds of up to 60% in some cases has instilled a degree of fear into large companies and private individuals alike, and with reputation of the financial markets requiring bolstering, CySEC is in the process of ensuring a future good name, as pointed out by a speech delivered by Demetra Kalogirou, Chairman of CySEC at this year’s iFXEXPO in which Ms. Kalogirou pledged her support for the financial services industry as a whole, but absolutely did not wish to answer questions posed by Forex Magnates at the time.
Priority To The Banking Sector
The general view from within is that there is a need to appease the banks as they make up a much bigger market segment than FX despite the level of FX presence in Cyprus, therefore it would rather see off the FX firms in order to help protect its name as a proper regulator.
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“You can see from all public company reports where the revenue is coming from, and it’s not Europe, especially during the past two to three years” Mr. Tovmasyan explained. He understands that there may be a very serious matter at the bottom of this decision in that shoring up the reputation of the banks is vital to Cyprus. “The country would risk its bailout if it didn’t protect the financial industry”.
Max Lebedev, CEO of Forex4You believes that this is a double-edged sword, and can be looked at from different perspectives: “I think there two sides of the coin” Mr. Lebedev told Forex Magnates. “Companies should look at this as a potential client base from two categories: non-EU clients from countries with regulators, and non-EU clients from countries without a regulator.”
Prohibitively Impractical
Mr. Lebedev explained this particular point further: “In the second case, clients just won’t be able to get an authorization letter. In first case, I think clients will face serious issues in getting such a letter from a domestic regulator too. Anyway, that action from CySEC will have a substantial negative impact on existing companies, and for newly established entities CySEC regulation will not be attractive at all.”
“How these companies will manage not to lose market share, depends entirely on their business expansion plans. Obviously, they will turn their focus to more “universal” regulations. I assume that action from CySEC is driven by EU, and directly related to recent bank crisis and enforcing the rules of managing the “external” funds in Cyprus” concluded Mr. Lebedev.
A question that is raising its head yet again is whether FX firms will consider a move to London, in order to remove the risk of further bail ins, and to ensure the ability to gain a client base which is international. One particular large institutional FX firm in London today explained to Forex Magnates that: “The move by CySEC, if it goes ahead at all, would be disasterous for a lot of retail brokers based there. It will also stop anyone wanting to set up in Cyprus in future, instead making London a viable option despite the cost. It is probably overall a cheaper exercise to set up one office in London and pay the costs associated with the regulations here, than to have two offices with two regulatory costs”.
The broker, who requested anonymity, continued: “it will effectively kill the growth of CySEC regulated brokers whilst playing into the hands of the bigger brokers who can afford to be regulated in multiple jurisdictions or to set up with FCA regulations”.
“On the other hand, brokers who wish to still have access to European markets and keep the costs down, plus not be restricted like this may see Malta as an alternative” concluded our source.
A Good Move To Limit Exposure
One particular company which demonstrated its agreement with the proposed ruling is Easy Forex. “It seems like CySEC is doing the right thing by limiting their exposure and clearing up their list of regulated companies. Easy-Forex is not affected at all by this move. Our CySEC regulated company only accepts clients from EU” explained the company’s Chief Marketing Officer Hilik Nissani.
Forex Magnates will follow this closely and provide further perspectives as the industry responds further.
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This is the end for Cyprus as a Forex jurisdiction. Very clever move by CySEC however. This removes all the russian and other undesired so called “black money accounts” that have been sitting with forex brokers in Cyprus. Appeasement of the Troika paymasters is kicking in like paying tribute to an empire… Also any client funds from Israel, MENA and other jurisdictions which were not so easy to get AML´ed into the EU are now forced out with the decision of CySEC. Incredible how the impact of the Troika bailout comes in tranches. Wonder what is next…? I say, Cyprus… Read more »
This is the end for Cyprus as a Forex jurisdiction. Very clever move by CySEC however. This removes all the russian and other undesired so called “black money accounts” that have been sitting with forex brokers in Cyprus. Appeasement of the Troika paymasters is kicking in like paying tribute to an empire… Also any client funds from Israel, MENA and other jurisdictions which were not so easy to get AML´ed into the EU are now forced out with the decision of CySEC. Incredible how the impact of the Troika bailout comes in tranches. Wonder what is next…? I say, Cyprus… Read more »
Absolutely the end of Cyprus FX business. Great moves by Alpari & FXPro to get out. FCA regulation the only way forward.
Troika inspired for sure. They have managed to screw the Russians.
Absolutely the end of Cyprus FX business. Great moves by Alpari & FXPro to get out. FCA regulation the only way forward.
Troika inspired for sure. They have managed to screw the Russians.
Whats the ballpark upfront cost to get a FCA license and to maintain it? And opportunity cost in terms of minium capitalization – compared to Cyprus?
Whats the ballpark upfront cost to get a FCA license and to maintain it? And opportunity cost in terms of minium capitalization – compared to Cyprus?
Easy Forex is happy as Hilik Nissani explained they are not affected. Because there exist two easy forex companies. One which is regulated that takes EU clients and the other which is unregulated and not licensed which is incorporated in marshall islands. However and although the same domain exist for both companies, if a client accesses the website from outside EU he goes to the same domain but without the CYSEC license and vice versa. The easy forex model which Mr Nissani described is a nice model, but is misleading to clients, and while a non EU client trades, he… Read more »
Easy Forex is happy as Hilik Nissani explained they are not affected. Because there exist two easy forex companies. One which is regulated that takes EU clients and the other which is unregulated and not licensed which is incorporated in marshall islands. However and although the same domain exist for both companies, if a client accesses the website from outside EU he goes to the same domain but without the CYSEC license and vice versa. The easy forex model which Mr Nissani described is a nice model, but is misleading to clients, and while a non EU client trades, he… Read more »
BTW forexmagnates this old news was released 26th of July. You are late
BTW forexmagnates this old news was released 26th of July. You are late
What about binary options?
What about binary options?
IMHO, this move by CySEC is a scare tactic to slam down on a particular type of CIF who did something “naughty” outside of the EU. Point 3 of the ruling states “Therefore, the Commission requests CIFs to cease immediately the provision of services to third countries…”. For those of you who don’t already know, CIF stands for “Cyprus Investment Firms”, so this ruling is not targeted specifically to forex brokers but rather the entire list of 144 firms found at this link: http://www.cysec.gov.cy/licence_members_1_en.aspx You will notice that less than half of the CIF’s on this list are forex brokers… Read more »
IMHO, this move by CySEC is a scare tactic to slam down on a particular type of CIF who did something “naughty” outside of the EU. Point 3 of the ruling states “Therefore, the Commission requests CIFs to cease immediately the provision of services to third countries…”. For those of you who don’t already know, CIF stands for “Cyprus Investment Firms”, so this ruling is not targeted specifically to forex brokers but rather the entire list of 144 firms found at this link: http://www.cysec.gov.cy/licence_members_1_en.aspx You will notice that less than half of the CIF’s on this list are forex brokers… Read more »
The law states that CIFs must obtain authorisation from all non-eu countries.this has always been the case since the start of the fx boom in cy.cysec jus turned a blind eye to it.that a lot of the cifs did not abide by the law is their problem!
The law states that CIFs must obtain authorisation from all non-eu countries.this has always been the case since the start of the fx boom in cy.cysec jus turned a blind eye to it.that a lot of the cifs did not abide by the law is their problem!
Marks the end of Cyprus as a prime location, but I’m not sure you will seeing all of these operators queuing up for an FCA license all of a sudden. There are still a number of friendly MiFID jurisdictions out there which some of the brokerages, might consider, including Malta (listed in the article) and Bulgaria. Also it will be interesting to see how the Binary options brokers who are based in Cyprus decide to act, as they are limited in terms of where they can be regulated, or are they not covered by the ruling. The move was presumably… Read more »
right 🙂 wait for it..
right 🙂 wait for it..
Marks the end of Cyprus as a prime location, but I’m not sure you will seeing all of these operators queuing up for an FCA license all of a sudden. There are still a number of friendly MiFID jurisdictions out there which some of the brokerages, might consider, including Malta (listed in the article) and Bulgaria. Also it will be interesting to see how the Binary options brokers who are based in Cyprus decide to act, as they are limited in terms of where they can be regulated, or are they not covered by the ruling. The move was presumably… Read more »
@ Ron, Wrong as the Cyprus broker is required, effective immediately, to obtain verification from the client´s home regulator that it is ok. Most people do not seem to understand what this is all about – tax evasion of dodgy money. If you had a USD million undeclared, would you go to the Central Bank of Israel and as for such confirmation or in Russia to the Central Bank? Such countries do on PURPOSE not have such regulation as it is not desired that private individuals speculate. @ Andy, GBP 2-3m to set up and get going including a solid… Read more »
@ Ron, Wrong as the Cyprus broker is required, effective immediately, to obtain verification from the client´s home regulator that it is ok. Most people do not seem to understand what this is all about – tax evasion of dodgy money. If you had a USD million undeclared, would you go to the Central Bank of Israel and as for such confirmation or in Russia to the Central Bank? Such countries do on PURPOSE not have such regulation as it is not desired that private individuals speculate. @ Andy, GBP 2-3m to set up and get going including a solid… Read more »
Question.. What about Fx brokers who have multiple licenses.. is it business as usual? Ex: Markets.com has Cysec and FSB (South Africa) so in this case, the above ruling is void?
Question.. What about Fx brokers who have multiple licenses.. is it business as usual? Ex: Markets.com has Cysec and FSB (South Africa) so in this case, the above ruling is void?
great choice by the TASE board
great choice by the TASE board
@ Alan Hill
Regarding your comment: “Absolutely the end of Cyprus FX business.”
It’s will be a shame if this is actually the case. It’s probably the last sector left that is still recruiting. So if you live in Cyprus and you are a professional in the industry…looks like you are out of a job mate.
I would be a little more enthusiastic if I where you.
@ Alan Hill
Regarding your comment: “Absolutely the end of Cyprus FX business.”
It’s will be a shame if this is actually the case. It’s probably the last sector left that is still recruiting. So if you live in Cyprus and you are a professional in the industry…looks like you are out of a job mate.
I would be a little more enthusiastic if I where you.
This is what MAYZUS said in the press-release on 31 of August: Dear Non-European Union Clients, On 26 of July 2013, our regulatory authority CySEC issued a circular CI144-2013-22 requesting all CIFs “to cease immediately the provision of services to third countries if they have not consulted with the competent authorities of those third countries that are allowed to do so within their territories”. We have come to the understanding that it is impossible to fulfill this requirement within the provided time frame (by the 23rd of August 2013), and we believe that it is unethical to cease to provide… Read more »
This is what MAYZUS said in the press-release on 31 of August: Dear Non-European Union Clients, On 26 of July 2013, our regulatory authority CySEC issued a circular CI144-2013-22 requesting all CIFs “to cease immediately the provision of services to third countries if they have not consulted with the competent authorities of those third countries that are allowed to do so within their territories”. We have come to the understanding that it is impossible to fulfill this requirement within the provided time frame (by the 23rd of August 2013), and we believe that it is unethical to cease to provide… Read more »
Russia ignored Cyprus’ repeated requests for financial assistance in the months leading up to the EU’s bailout acceptance, and in doing so Russia had basically surrendered their financial foothold in the EU!
Ignoring the plight of Cyprus is perhaps Putin’s worse blunder in his career.
Russia ignored Cyprus’ repeated requests for financial assistance in the months leading up to the EU’s bailout acceptance, and in doing so Russia had basically surrendered their financial foothold in the EU!
Ignoring the plight of Cyprus is perhaps Putin’s worse blunder in his career.
MAYZUS… now there’s a name you can trust! :-0
MAYZUS… now there’s a name you can trust! :-0
Hi John, thanks for your comments about how we work. We’d like to ask you to please take the time to visit our relevant sites, so you can see that what you stated about our mode of operation is inaccurate.
Hi John, thanks for your comments about how we work. We’d like to ask you to please take the time to visit our relevant sites, so you can see that what you stated about our mode of operation is inaccurate.
Dear All, I have read carefully the article written by Andrew Saks McLeod and I would like to clarify a few important issues as follows: It is really unfair to criticize CySEC based on a wrong interpretation of the Circular CI 144-2013-22. CySEC is not demanding from any client to go directly to his local authority and obtain permission to open an account with a CySEC regulated broker neither is trying to damage the good standing name of Cyprus as a well recognised and well established Forex and Binary hub, nor is trying to make the life of CySEC regulated… Read more »
Dear All, I have read carefully the article written by Andrew Saks McLeod and I would like to clarify a few important issues as follows: It is really unfair to criticize CySEC based on a wrong interpretation of the Circular CI 144-2013-22. CySEC is not demanding from any client to go directly to his local authority and obtain permission to open an account with a CySEC regulated broker neither is trying to damage the good standing name of Cyprus as a well recognised and well established Forex and Binary hub, nor is trying to make the life of CySEC regulated… Read more »
Not a Forex expert, but if FOREX brokers were allowed, until now, to solicit business from non-EU jurisdictions in which they have no authorization to operate, then this is a no-brainer. And I don’t think any other EU jurisdiction, including UK, could get away with this kind of “tolerance” for long… or maybe could it??
If the regulation applies to the forex company and not each individual client, as Stavros said, then it should not be so difficult to comply. If this is the case, I find the title of the article rather sensational and probably misleading.
Not a Forex expert, but if FOREX brokers were allowed, until now, to solicit business from non-EU jurisdictions in which they have no authorization to operate, then this is a no-brainer. And I don’t think any other EU jurisdiction, including UK, could get away with this kind of “tolerance” for long… or maybe could it??
If the regulation applies to the forex company and not each individual client, as Stavros said, then it should not be so difficult to comply. If this is the case, I find the title of the article rather sensational and probably misleading.