Cyprus had traditionally been an ideal hub for FX and binary options retailers, with manageable processes for registration and licensing, access to traders in the EU and a somewhat lax approach to administrative fining. Last year however, what had been an FX-paradisiac island with the occasional €5000 fine imposed by its regulatory body CySEC, has turned into a blood-in-the-water-market, after the financial regulator began cracking down on local brokerages and imposing fines on several large brokers totaling no less than €1,000,000 in fines and settlements for violations including bad handling of clients’ complaints, misleading advertising and poor assessment of clients’ trading.
The significant rise in fines issued by CySEC to many CIFs during 2015 was a clear indicator of the increase in regulatory measures in the region and it seems that it was only the first round. In 2016 so far we have seen a settlement made by CySEC with binary options brokerage Banc de Binary for €350,000 and a fine of €156,000 imposed on Rodeler Limited (24option.com).
According to our company’s executives in the region, this tightening of regulation is far from over and is expected to persist in the coming year and CIFs which do not take regulation seriously will be severely affected. CySEC has additional companies in sight and is preparing to announce further fines soon.
Regulatory bodies around the world are all working on a common goal of trying to produce a safe and trusted environment for investors to participate in. New and booming markets always bring with them new technologies, new products and new ideas that existing frameworks fail to capture properly and thus regulatory bodies constantly find themselves in a never ending catch-up game trying to find the middle point between protecting clients and enabling healthy business development.
This crackdown will certainly make the market cleaner, by forcing investment firms to serve their clients in a better, more transparent way. Naturally however, not all brokerages may survive these changes as there are additional costs involved in establishing new procedures.
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Although CySEC has often been mocked for its ingenuous approach to regulating, if it manages to clamp down on companies who do not abide by its established procedures it could establish itself as a respectable and credible financial regulator in Europe once and for all.
At the end of the day, the end result is always for the benefit of the investor and ultimately the industry itself.