Regulations for Signal and Copy Trading? Tradeslide Gains FCA Authorization
- Compliancy Services, a UK consulting firm that provides assistance to firms with their FCA regulatory needs has announced that their client, Tradeslide has gained authorization to act as an FX Investment Manager.
UK based Compliancy Services, a consulting firm that provides assistance to firms with their FCA regulatory and compliance needs has announced that their client, Tradeslide Trading Tech has gained authorization to act as an FX Investment Manager. It is an interesting development in terms of Tradeslide’s business model.
We wrote about Tradeslide back in February, as the firm was about to launch. Currently still in a live private beta period, Tradeslide created an innovative rating system for traders called the TS Score. In addition to rating traders on performance, the Score takes into account such items as risk, experience, Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. Read this Term, and exit patterns. The goal is to provide non-experts with a tool that differentiates between investable strategies and lucky outperformers. Users of the system are also offered insights on their trading and provided features to help them succeed in the future. The product currently provides members the ability to contribute content and to mentor new traders. Not yet launched, are copy trading features. However, with the firm becoming regulated as a money manager, it’s safe to say that mirror trading is a direction they are moving towards.
Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term Magnates reached out to Tradeslide CEO, Juan Colon for more information about their FCA regulation, mirror trading, and future plans. Colon responded that he was unable to speak about Tradeslide’s asset management license or their future plans, other than his prepared statement he provided on the Compliancy Services press release of “Receiving FCA Authorisation is a significant boost for us. We have invested in people and technology and are looking forward to providing the most dynamic mirror trading service available to our clients. Gaining FCA Authorisation highlights our commitment to service and quality.”
Colon did explain that during their current live beta testing, they have integrated their product with cTrader and MT4. In addition, they are in discussions with another technology provider in regards to offering wider integration (tradable, MT5, etc). They are using the beta period to determine the proper methods of platform integration, as well as what the pitfalls are. As a result, Colon stated to us that “we only want to publically release our final product when we know that it is fully tested and the features work flawlessly.”
Future of Copy Trading and Signals
Without providing much details, Colon did refer us to an ESMA circular about trading signals from 2012. Also alluded to in the Compliancy Services press release, the ESMA article deals with the legalities of automatic trading signals and whether they fall within regulated investment services. The circular answered that if trading signals are used for MiFID financial instruments, they would require authorization as they fall under portfolio management. The exception being, when signals need to be individually confirmed for execution by customers. As an independent institution whose mission is to create uniform pan-European financial rules, ESMA opinions aren’t laws. However, they provide a framework for regulatory bodies when creating and enforcing their laws.
In terms of copy trading, the product is far from being new. But, regulations are one area of the sector that has been slow to take shape. Mirror trading platforms provide users the ability to copy trades automatically of other traders in the system. While a customer chooses which traders to follow, they have no say on the trades themselves. As such, there has been increasing discussion whether copy trading is a form of money management that would require platform providers to become licensed as asset managers. Specifically in the UK, where the newly established FCA has begun to implement new rules effecting different facets of the financial industry, there is an expectation among many insiders that we will soon see money management requirements hit the copy trading space, with some believing a framework by the end of this year.
If ESMA advice is enforced, it would create a situation where signal providers and social trading networks would require additional licensing to provide their products in the EU. In addition, PAMM and MAMM traders would be required to become regulated money managers (in many jurisdictions these PAMM/MAMM laws do exist, but aren’t always enforced). Such a situation would be expected to create ripples within the auto trading sector and limit the ability of brokers to promote such services.
With looming changes on the horizon, Tradeslide appears to be taking the initiative to become licensed as an FX Investment Manager, to stay ahead of the regulatory curve.
UK based Compliancy Services, a consulting firm that provides assistance to firms with their FCA regulatory and compliance needs has announced that their client, Tradeslide Trading Tech has gained authorization to act as an FX Investment Manager. It is an interesting development in terms of Tradeslide’s business model.
We wrote about Tradeslide back in February, as the firm was about to launch. Currently still in a live private beta period, Tradeslide created an innovative rating system for traders called the TS Score. In addition to rating traders on performance, the Score takes into account such items as risk, experience, Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. Read this Term, and exit patterns. The goal is to provide non-experts with a tool that differentiates between investable strategies and lucky outperformers. Users of the system are also offered insights on their trading and provided features to help them succeed in the future. The product currently provides members the ability to contribute content and to mentor new traders. Not yet launched, are copy trading features. However, with the firm becoming regulated as a money manager, it’s safe to say that mirror trading is a direction they are moving towards.
Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term Magnates reached out to Tradeslide CEO, Juan Colon for more information about their FCA regulation, mirror trading, and future plans. Colon responded that he was unable to speak about Tradeslide’s asset management license or their future plans, other than his prepared statement he provided on the Compliancy Services press release of “Receiving FCA Authorisation is a significant boost for us. We have invested in people and technology and are looking forward to providing the most dynamic mirror trading service available to our clients. Gaining FCA Authorisation highlights our commitment to service and quality.”
Colon did explain that during their current live beta testing, they have integrated their product with cTrader and MT4. In addition, they are in discussions with another technology provider in regards to offering wider integration (tradable, MT5, etc). They are using the beta period to determine the proper methods of platform integration, as well as what the pitfalls are. As a result, Colon stated to us that “we only want to publically release our final product when we know that it is fully tested and the features work flawlessly.”
Future of Copy Trading and Signals
Without providing much details, Colon did refer us to an ESMA circular about trading signals from 2012. Also alluded to in the Compliancy Services press release, the ESMA article deals with the legalities of automatic trading signals and whether they fall within regulated investment services. The circular answered that if trading signals are used for MiFID financial instruments, they would require authorization as they fall under portfolio management. The exception being, when signals need to be individually confirmed for execution by customers. As an independent institution whose mission is to create uniform pan-European financial rules, ESMA opinions aren’t laws. However, they provide a framework for regulatory bodies when creating and enforcing their laws.
In terms of copy trading, the product is far from being new. But, regulations are one area of the sector that has been slow to take shape. Mirror trading platforms provide users the ability to copy trades automatically of other traders in the system. While a customer chooses which traders to follow, they have no say on the trades themselves. As such, there has been increasing discussion whether copy trading is a form of money management that would require platform providers to become licensed as asset managers. Specifically in the UK, where the newly established FCA has begun to implement new rules effecting different facets of the financial industry, there is an expectation among many insiders that we will soon see money management requirements hit the copy trading space, with some believing a framework by the end of this year.
If ESMA advice is enforced, it would create a situation where signal providers and social trading networks would require additional licensing to provide their products in the EU. In addition, PAMM and MAMM traders would be required to become regulated money managers (in many jurisdictions these PAMM/MAMM laws do exist, but aren’t always enforced). Such a situation would be expected to create ripples within the auto trading sector and limit the ability of brokers to promote such services.
With looming changes on the horizon, Tradeslide appears to be taking the initiative to become licensed as an FX Investment Manager, to stay ahead of the regulatory curve.