Polish online trading brokerage X-Trade Brokers has been back and forth in its future plans for operations within Turkey. After the announcement by the Capital Markets Board (CMB) of Turkey that new and more stringent regulations will be implemented, the broker initially indicated it was considering leaving the Turkish market.
The increased regulatory restrictions put in place by the CMB include reducing the maximum leverage to 10:1 from its previous levels of 100:1. Such a drastic decrease clearly impacts the ability of traders to execute large scale, high risk trades.
While the move was clearly put in place to protect retail investors, it also dampens the appeal of the FX and CFD market by reducing the potential profits (and losses) that can be incurred, relative to previous levels.
Another modification of previous regulation was the raising of the minimum margin in portfolios to 50,000 Turkish lira (roughly $13,140). The CMB appears determined to address traders’ ability to reach high exposure levels, which put their investments at greater risk.
In response to the changes implemented by the CMB, XTB has been wavering in its decision on whether to remain active within the Turkish market. While initially it appeared that XTB would exit the country, recent reports indicate that the company might retract that decision and continue to offer its services to Turkish citizens.
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Finance Magnates interviewed XTB board member Paweł Szejko to get some clarification regarding the company’s current predicament:
What are your plans for the Turkish retail trading market?
In May 2017 XTB decided to withdraw from the Turkish market due to regulatory changes implemented by the CMB in February. Changes related in particular to the decrease of the obligatory leverage used by investors to 10:1 and implementation of a minimum first deposit of TRY 50,000. On 30 November 2017, XTB decided to suspend the phasing out of XTB’s activity on the Turkish market and the liquidation of its subsidiary by 30 June 2018.
This decision was driven by rumors which indicated the possibility of mitigating the regulations. XTB does not exclude the resumption of operations in Turkey in the event of a relaxation of the regulations introduced by CMB in February 2017.
Why do you expect a revision of the terms? Do you have any indications as to what the new margin level will be?
Although CMB and the Capital Markets Association have not explicitly announced any preparation or draft for amending the aforementioned CMB regulations, there have been rumors in the financial market about a potential amendment to the legislation which will increase the maximum leverage ratio and decrease the minimum deposit amount.
Accordingly, the general expectation is an increase of the leverage ratio to 25:1 for individual customers and 50:1 for professional customers.
Is Turkey a major market for XTB? Have you seen an increase in client deposits and/or trading activity?
Currently XTB suspended its business activity in Turkey.