Regulatory Expansion: British Virgin Islands FSC Issues AvaTrade With Regulatory Approval

The British Virgin Islands has long been synonymous with its hosting of a number of FX companies, the majority of which were unregulated by any financial markets regulator, and had their entire operations based in different countries.

Subsequent to the recent implementation of a regulatory structure which allows overseas FX firms to become regulated by the British Virgin Islands Financial Services Commission and operate under the auspices of a regulatory authority rather than the previous situation which involved having a registration certificate, the latest FX company to receive such a license is AvaTrade, having been issued with the regulatory approval yesterday.

Global Coverage Via Regulatory Oversight

During recent times, AvaTrade has maintained an interest in accessing different global markets via regulatory approval in various jurisdictions including Australia, Ireland and Japan.

The company also has operations in Israel, which will be subject to the Israel Securities Authority (ISA)’s strict regulatory reform this year, posing the question as to whether the business will remain viable in the financially strong nation.

Last month, Oren Eldad, CEO of AvaTrade in Israel spoke to 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 tradi 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 tradi Read this Term Magnates to relay his take on the potential new rulings, as he began working with the ISA on consultation regarding the implementation since 2008, one year after his appointment as CEO of the firm.

Mr. Eldad explained to Forex Magnates that he is “happy to say that a lot of our remarks have been accepted by the ISA but yet there are some problematic issues which we are still in dialog with them over”.

As a contrast to this perspective, another senior executive of a retail broker in Israel who wishes to maintain anonymity sees this as a “death punch to the entire FX industry in Israel”, and that all non-bank FX in Israel could end up not economically viable for such companies.

Tough Regimes

The regulatory authorities around the world are increasing their requirements, and in doing so ensuring that all participants are under constant surveillance. Britain’s Financial Conduct Authority, the US National Futures Association, and Australia’s ASIC are prime examples of national regulators which are going more than the extra mile and in doing so increasing the cost of operating as well as the likelihood of being penalized for transgressions of the ever growing list of rules.

Until recently, companies were able to register in New Zealand and base their operations in other regions with no physical operations. This has now come to an end, and the regulator terminated the registration of a large number of entities which did not have facilities including a compliance department in New Zealand, and established a full set of procedures for enforcement under the Financial Markets Authority’s mandate.

The British Virgin Islands, although offering regulated status, currently still allows firms to be entirely based overseas.

Trevor Clein, Compliance Director MLRO at Delta Financial Markets in London today explained this in detail to Forex Magnates: “At the outset, before regulated status was offered, a lot of FX companies had a Post Office box in the British Virgin Island, and a lawyer that would act on their behalf”.

“Even now, despite providing regulated status to its members, the British Virgin Islands FSC is not really a financial markets regulator, as it doesn’t cover any of the threshold conditions that one would expect. Any proper regulated regime would have threshold requirements that ensure firms under its auspices have an office, bank accounts there as well as administrative matters such as the issuance of invoices from there, as well as regular compliance inspections. The term regulation is so loose in such cases.”

Mr. Clein believes that firms use it to assist with marketing as it provides credibility: “It’s a marketing thing, because the word regulation is supposed to mean credibility. If you say you are regulated by the FCA in the UK it means you are properly supervised and under constant watch of the authorities. This is one of the problems with Cyprus”, Mr. Clein continued, “insofar as that it is supposed to be a MiFID country but it doesn’t have the same supervision as the UK. Also Bulgaria which falls under MiFID. It’s a tick box exercise. All you have to do is keep certain documents in case the regulator wants to know anything but in reality they never do.”

One of the first companies to gain regulated status via the British Virgin Islands FSC was Gallant Capital Markets, which offers retail trading via its proprietary GCMPro platform provided by FX Bridge Bridge The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service their clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Met The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service their clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Met Read this Term, and has held the license since 2010.

Regarding AvaTrade’s licensing in the British Virgin Islands, the company’s CEO Emanuel Kronitz stated in a company statement: “We are enormously satisfied that after a very thorough examination of all of our policies and procedures we have been awarded this license by the BVI Financial Services Commission. This serves as a vindication of the high standards that we strive to maintain and as a guarantee to our clients that they can continue to expect those standards to be met in the future. We believe strongly that all traders deserve the protection and peace of mind afforded by fully regulated and licensed brokers.”