After searching through regulatory documents, Finance Magnates has learned that it is now going to be much more expensive for contracts for difference (CFD) providers that have a license within The Bahamas, as the local regulator has added a new fee category for CFD dealers.
In particular, legislation from the Securities Commission of The Bahamas was passed on the 27th of May 2020 by Parliament, amending the existing fee rules in place since January 2018.
Following this change, “persons seeking to register to deal in Contracts for Differences” will have to pay an application fee of $2,500, a registration fee of $15,000 and an annual renewal fee of $30,000, according to the Official Gazette of The Bahamas.
However, according to the amended rules, a registered CFD firm shall, in addition to paying the annual renewal fee, need to pay a quarterly activity fee of $45,000, unless the firm has been exempted or had the fee reduced by the Securities Commission.
Furthermore, a “CFD Supervisory Officer” will be subject to a $1,000 application fee, a $3,000 registration fee, and a $5,000 annual renewal fee, the document showed.
Annual cost of CFD license increases by 15 times
The new fees for CFD providers dramatically increase the annual cost of having a Bahamas license to more than $230,000 per year, which is almost 15 times more than the previous cost of around $16,500.
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Speaking to Finance Magnates on the changes, Jim Manczak, Director of Bahamas Offshore Services, said: “The Securities Commission intends to make the Bahamas a premium jurisdiction. This sends a clear signal to unscrupulous CFD brokers to not even consider the Bahamas. But, the most important question is whether or not the most well established and reputable brokers will accept it.”
The role of The Bahamas in FX
The Bahamas is one of the most legitimate offshore jurisdictions. However, the significant uptick in fees in The Bahamas is an interesting move from the regulator. Of course, the increase in fees is likely to drive away fraudsters, but it could also drive away legitimate brokers who are seeking an offshore jurisdiction, as they could easily go to other countries, such as Seychelles or Vanuatu.
With such high fees, there needs to be a clear benefit for brokers if they are to pay so much for a CFD license. There was already a question as to whether The Bahamas would remain an attractive destination following leverage restrictions, this move from the regulator will likely put the country’s viability further into question.
Securities Commission introduces leverage restrictions
The regulation from the Securities Commission of The Bahamas was passed at the same time as a new set of regulations introduced by the authority, which included leverage restrictions and banning binary options.
As Finance Magnates reported, legislation was passed to allow the SC of The Bahamas to implement leverage restrictions of 200:1, as well as ban binary options trading. The regulator will also impose marketing restrictions, which will limit cold calling and other aggressive marketing tactics.
This, coupled with the new fee structure, creates a significantly more regulated environment. Until recently, although the island nation did have a broker-dealer regulatory framework, dealing CFDs was loosely defined.