$5.5 Million Fine Imposed on Interactive Brokers by FINRA

It has recently been announced by FINRA that they have decided to fine Interactive Brokers LLC with an amount of $5.5 million for violating the SHO regulations as well as the lack of supervision for a period of three years.

The firms need to deliver the settlement date or take necessary actions to put an end to the "failure to deliver" by borrowing or buying the securities after the completion of a short transaction as per regulation SHO of SEC.

If the firm fails to close the issue of failure to deliver, then they cannot participate in short transactions without making arrangements for procuring the securities.

It has also been prohibited by the regulation SHO to carry out or offer a short sale at a price that is either less or equal to the national best bid if the security of the price has fallen at least by 10 percent in a single day.

It has been found by FINRA that for the period between July 2012 to June 2015, the supervisory systems of Interactive along with its supervisory procedures were not on par with the requirements of Regulation SHO.

Furthermore, the broker LLC also ignored several red flags from its compliance and clearing personnel, FINRA, risk assessments, given in the form of internal audits and warnings.

Failure to Close More Than 2300 Transactions

These warnings clearly showed that its system for Regulation SHO supervision was impractical. Despite knowing the incapability of its supervisory system, Interactive did not take any action up until mid-2015.

Thus, it failed to close more than 2300 fail-to-delivers and carried out short transactions without preparing to procure securities for over 28,000 times. Moreover, Interactive displayed more 4,700 short sale orders in covered securities at a price that was less than the best national bid.

Susan Schroeder, the Executive Vice President of FINRA said

"Firms that are aware of deficiencies in their supervisory systems must promptly remediate them. In this case, the firm internally identified the problems, yet did not revise its supervisory systems for more than three years, creating the potential for negative impact on the markets and investor harm."

Interactive did not admit but also did not deny the charges against them to settle the matter rather they consented to the findings of FINRA.

FINRA is a non-profit organization that works to protect the investors and maintain the integrity of the market. Based in the US and controlled by SEC, FINRA creates rules and regulations apart from enforcing the compliance with the FINRA rules as well as federal laws.

FINRA also protects the integrity of the equity and the options market while maintaining a forum to resolve the disputes of investors, brokerage firms as well as their employees.


FXCM Adds New Tools to ‘Clients Only’ Plus Portal

It has been recently announced by the FXCM group that they are going to update their free client trading portal FXCM Plus. Equipped with a plethora of features and tools, the website has been designed in such a way that they can help the traders to get detailed information on different markets as well as their positions.

The company is also offering complete access to every individual who holds an account in the website. However, it is better to say that most improvements have been made to the existing Trading Analytics 4 suite. After the update, the suite now offers better content, a percentage of daily returns and account statistics for improved analysis. Furthermore, the FXCM Plus portal comes with trading analytics suite, trading signals and trading analyzer.

While the brokers are striving hard to get a competitive edge over others, the large firms keep adding interesting features to improve the rate of conversion and retention of clients. So, it can be considered as an intelligent business plan to gain a great advantage over others by offering great features when clients are looking for new brokers.

FXCM to Attempt to Gain Access to the US Clients

Reportedly, FXCM has sold off its education portal named DailyFX to the renowned IG group. Moreover, the UK brokerage sealed a deal by signing a contract which allowed FXCM to gain access to the US clients. However, the broker is not using the portal properly since the IG group exited the US.

The companies are also putting pressure to enhance their educational efforts in order to ensure maximum success in the long term for their clients as well as the business. Inspection of regulations on the industry over the last few months has proven one thing that the forex exchange or forex brokers need to give prime focus to the interest of the clients.

With the recent boost in the number of unregulated brokers as well as the increase in the foul practices amongst the brokers who are regulated, it has resulted in different updates as well as reviews of practices in the industry. Moreover, the ESMA or the European Securities Markets Authority has also updated its requirements thereby urging the retail brokers to stop the foul practices across the EU.


Middle East based Retail FX Broker One Financial gets acquired by AxiCorp

Australia based retail forex broker as well as CFD brokerage group, AxiCorp has announced that it is going to take the acquisition of the One Financial Markets (OFM) brand. Though the AxiCorp basically manages the AxiTrader brand, it has decided to acquire the FCA regulated CB Financial Services Ltd which is primarily based in the Middle East. It has been revealed that the deal will be basically based on cash. So, it will be subjected to several custom regulations.

With this deal, the roads will be paved for Khalifa Butti Bin Omeir, the prime shareholder, founder of OFM and the chairman of the KBBO group circumscribe equity in the AxiCorp.

Once the deal is finalized, AxiCorp will take charge of all the operations, employees and licenses of OFM. As a result, OFM will exist under AxiCorp as a brand thereby maintaining its strong presence in the Middle East, Europe, South America as well as southeast and central Asia.

Both organizations have notified the public that the merger of these two companies is the result of a year worth of negotiations. And this merger did not come as surprise as the consolidation streak continues in the FX and CFD market due to various regulatory changes that are due to happen.

As far as the profit of One Financial is concerned, it saw a net profit of $240,000 from the generated revenue of $28.4 million in the last financial year.

AxiCorp to Consolidate Presence in Middle East

The CEO of AxiCorp, Rajesh Yohannan stated:

"We established AxiCorp a decade ago to provide Australian FX and CFD traders with a home-grown option. Our clients now span the globe, so we see the acquisition of a London-based competitor as a milestone both for us and the industry as a whole."

As the deal happens, the presence of AxiCorp in key markets such as Central and Southeast Asia, UK and Middle East will further be solidified. This joint operation between AxiCorp and OFM will result in $2 trillion estimated trading volume thus it will cement the position of the company in top 10 global FX and CFD providers.

The CEO of OFM, Ashley Clarke commented that:

"After building the OFM brand and network in several key markets, this (acquisition) is a great opportunity to get to the next level of growth. And it’s a privilege that we will be part of the global AxiCorp family as we pursue other markets. Given AxiCorp’s focus on continued growth and expansion, we look forward to a stronger presence in the FX and CFD markets."

With its headquarters in Sydney, AxiCorp has been working hard to establish itself globally since Rajesh Yohannan took the responsibility of Chief Executive Officer of the company almost two years ago. AxiCorp has also been successful in confirming crucial investments from RGT Capital, a private equity firm.

“We have laid a solid and strategic foundation for global growth in recent years and we’re now delivering against this plan. Expansion will be fuelled by a combination of product development and acquisitions across the industry”

Rajesh Yohannan stated and continued to say:

“Overall demand for forex products is still rising, helped by market volatility and popularity of the product in emerging markets. But with new regulations coming into force this year, we believe consolidation will remain a key theme and expect to have the opportunity to make further strategic acquisition in due course.”


CySEC Fines InstaForex and ForexMart Parent for €130000

CySEC has issued a notice recently making everyone aware of their decision to impose a €130,000 fine on the Instant Trading EU Ltd, a regulated CIF broker that operates the InstaForex, InvestCity and ForexMart.

CySEC went out of its way this time to provide a clear explanation by dividing the fine into two different parts unlike what this regulatory organization does in similar cases.

The regulatory organisation fined the company €90,000 for not acting justly, professionally and honestly to work in order to benefit their clients. Furthermore, CySEC has stated that the company has been totally non-compliant while providing trading bonuses or benefits to the clients, using the leverage properly and safeguarding the clients against a negative balance.

The company was also fined €40,000 for not asking the clients to provide all the information required in proper details that show the experience as well as knowledge the clients have in investing money. CySEC stated that complying with this regulation is necessary since it helps a company to understand the products or services that are in the best interest of the clients.

However, the regulatory authority, CySEC also stated in their notice that the company has taken corrective measures after being warned and they do not have any track record of committing similar atrocities in the past.

The complete notice that CySEC issued is given down below:

02 August 2018

CYSEC Board Decision

Announcement date: 02.08.2018;  Board decision date: 11.06.2018

Regarding: Instant Trading EU Ltd

Legislation: The Investment Services and Activities and Regulated Markets Law, Directive DI144-2007-02 of 2012

Subject: Total Fine €130.000

The Board of the Cyprus Securities and Exchange Commission (‘CySEC’) would like to inform the public that, at the meeting held on June 11, 2018, it has decided to impose a total administrative fine of €130.000 to CIF Instant Trading EU Ltd (‘the Company’) for non compliance with the following:

  1. the Investment Services and Activities and Regulated Markets Law of 2007, L.144(I)/2007 (‘the Law’), and
  2. CySEC Directive DI144-2007-02 of 2012 for the Professional Competence of Investment Firms and the Natural Persons Employed by them (‘Directive’).

In detail, the CySEC imposed an administrative fine:

A. of €90.000 for non-compliance with article 36(1) of the Law, as it did not act fairly, honestly and professionally in accordance with the best interests of its clients.

B. of €40.000 for non-compliance with article 36(1)(d) of the Law and paragraphs 15 and 16 of the Directive, as it failed to ask clients to provide the necessary information regarding their knowledge and experience, to assess whether the investment service or product is appropriate is appropriate for them.

In reaching its decision, the CySEC has taken into consideration the following:

(i) The importance attributed by the legislator to violations of this kind, which is reflected by the maximum administrative sanction provided for violations of article 36(1) of the Law, in article 42(3) of the Law, i.e. €350.000.

(ii) The importance attributed to the need to ensure that the persons subject to the supervision of CySEC comply fully with the provisions of the Law and the relevant Directives.

(iii) The importance attributed to the obligation of the CIFs for acting fairly, honestly and professionally in accordance with the best interests of its clients.

While in particular, the CySEC has taken into consideration the following factors –

1. For the Company’s non-compliance with article 36(1) of the Law,

(i) The importance attributed to protecting the interests of CIFs’ clients.

(ii) The fact that the Company’s non-compliance relates to the use of leverage, to the granting of bonuses/trading benefits to clients and to the clients’ negative balance protection, for which guidance was provided in CySEC Circulars C168 and C192, to ensure compliance with article 36(1) of the Law.

(iii) As moderating factors, the fact that:

– as stated in its representations, the Company has taken corrective actions in relation to the use/offer of leverage, the improvement of its mechanisms for the protection of customers from negative balance as well as the termination of the granting of bonuses/trading benefits to its clients,

– the Company did not commit a similar violation in the past.

2. For the Company’s non-compliance with article 36(1)(d) of the Law and paragraphs 15 and 16 of the Directive,

(i) The importance attributed to the protection of the interests of CIFs’ clients and more specifically the need to collect information on the clients’ experience and knowledge, which enables the CIF to better assess whether an investment service is appropriate for a client.

(ii) As moderating factors, the fact that:

– as stated in its representations, the Company has taken corrective actions and more specifically it has updated the procedure for the assessment of clients’ appropriateness as well as the relevant questionnaire,

– the Company did not commit a similar violation in the past.


IGM Forex License Suspended by CySEC

In a new notice, CySEC, the financial watchdog of Cyprus has notified everyone about their decision to suspend the CIF license for the trading of FX Broker based in Limassol, IGM Forex Ltd. In the notice, the regulating body has stated that they have undertaken the decision to suspend the company was based on the inadequacy that they found in the capital and funds requirements that the IGM Forex has shown.

As per the notice published, it was informed that the CySEC or Cyprus Securities and Exchange Commission has taken the action against the IGM Forex under the violation of rules and regulations by the company stated under section 71(6) (c) of the Τhe Investment Services and Activities and Regulated Markets Law of 2017 (L.87(I)/2017) in coalition with the rules stated in the Section 10(1)  of Directive DI87-05 for The Withdrawal and Suspension of Authorisation.

The financial regulating body has taken actions under the light of different suspicions that have been raised against IGM Forex. CySEC has allegedly charged the company under the violation of certain clauses that are mentioned below:

  1. Article 92(1) of Regulation (EU) 575/2013
  2. Section 10(1) of The Investment Services and Activities and Regulated Markets Laws of 2007 to 2016 (L.144(I)/2007) and Article 93(1) of Regulation (EU) 575/2013

The allegations that CySEC has brought against the IGM Forex are very serious. If these allegations are true, then it jeopardizes the safety of the investors and clients of the company. Furthermore, it disrupts the integrity of the Forex and securities market completely. CySEC has also provided the company with a deadline of 15 days to clear the allegations brought against them by complying with provisions that are mentioned above.

However, as long as the suspension is in action, IGM Forex has to follow the following regulations under the directives of section 9 of DI87-05:

  • The company will not have the permission to offer investment services; carry out any new transaction with any client or individual and promote itself as a Forex broker.
  • However, the company is allowed to finish the transactions of the clients or its own initiated before the suspension came into force. Furthermore, IGM will also have to return the funds as well as any other financial tool that belong to the clients.

French Regulator AMF Updates its General Regulations

In a new notice, the French Autorité des Marchés Financiers or AMF has stated that they have decided to amend its General Regulations. They have also published a new set of instructions in order to regulate the entry as per the latest Prospectus Regulations.

As per this new set of regulations, the threshold limit for offering Securities that needs a prospectus is increased to EUR 8 million. With this new regulation being put into effect from 21st July 2018, it has now also been made mandatory to prepare an information indenture if the public offerings of the uncharted securities fail to match the threshold limit.

The provisions for the PR3 or the European Prospectus Regulations for providing securities requiring a prospectus has also been annexed with this new set of regulation. Furthermore, a new notice numbered 2018-07 will also be published to establish this new rule. The following points will be covered in the new notice:

  • The threshold limit for the public offering of financial securities for which a prospectus will have to be published after being reviewed by AMF has been increased to EUR 8 million.
  • If the securities fail to meet the threshold limit, an information regime has to be published without carrying out an initial review from AMF has to be published for the case of securities that are not enlisted in any crowdfunding website.
  • In the case of Initial Public Offerings or IPOs on a fully organized multifaceted trading facility that is open to any individual, an information indenture has to be issued as per the market rules as well as reviewed by the operator stuff of the market when the securities fall under the threshold limit of EUR 8 million.

These new outlines have been preparing to consider the decisions made during the Initial Public Consultation which was organized at the time period between 24th January 2018 to 21st February 2018 along with reviews received during the second consultation that was held between 6th June 2018 to 29th June 2018.


HotForex to Offer MetaTrader 5 For Clients

Recently it has been announced by the popular and unique multi-asset broker, HotForex that they have included the highly advanced MetaTrader 5 Trading Platform in their system to benefit their traders even further. The platform has been made available for iOS, Windows as well as Android platforms.

According to a spokesperson on behalf of HotForex, the company plans to enable their users to trade more efficiently with the MT5 Platform. The spokesperson went on to say that HotForex understands that every trader has a different trading style thus the tools that require are varied too. The addition of the MT5 platform on top of the existing MT4 will boost the trading abilities of their clients and will make it easy for their users to facilitate trading on their own choice of device.

The MT5 Platform has been designed to serve as an improvement to the existing MetaTrader 4 platform. The MT5 offers access to the market at a much faster speed along with a wide array of advanced tools and upgraded charts. This advanced platform will allow traders to utilise the inbuilt economic calendars in a much efficient way. Furthermore, they will also be able to work on 21 timeframes and utilise over 100 charts at the same time.

With the introduction of the MT5 trading platform, the prospects of trading with HotForex has improved drastically. Equipped with advanced technologies, compatibility with different devices and a user-friendly interface, the MetaTrader 5 trading platform provides the traders with a better understanding of the market.

The advanced analytics tools help them to identify and isolate profitable trades and invest accordingly. In other words, the MT5 Platform will offer every trader all the opportunities to master the art of trading profitably in the Forex Market.

The different versions of MT5 Trading Platform available are listed below:

  • HotForex MT5 for Android
  • HotForex MT5 Terminal
  • HotForex MT5 for iPhone
  • MetaTrader 5 WebTerminal
  • HotForex MT5 for iPad

ESMA to Warn UK Brokers and Traders for Hard Brexit

A declaration has been recently made by the European Securities and Markets Authority (ESMA) that a Public Statement might be made for increasing the awareness amongst the participants in the market regarding the high probability of no consensus being reached on the issue of United Kingdom leaving the European Union.

In other words, the ESMA plans to warn the market traders to prepare for the worst case scenario which is becoming more probable with every passing day. Since no transition period has yet been decided, the UK entities need to plan for a hard BREXIT that may take place on 30th March 2019.

It had earlier been reported that UK-EU MiFD passporting would stay valid till December 2020 even if a "Hard BREXIT" happens. However, the recent circulars and activities have indicated that it may not be the case and the validity of UK-EU MiFD passporting may end on 30th March 2019. If that becomes the case then the UK-FCA firms that are interested to provide services to EU clients may require a license from EU entities.

ESMA has particularly emphasized on the fact that the firms are willing to relocate to EU27 in order to keep providing services there must have a fully authorized entity from ESMA and NCAs (National Competent Authorities) by 30th March of next year if the UK withdraws from European Union on the said deadline.

With the increase in submission of an application for relocation, ESMA has urged the UK entities to submit their application for relocation as soon as possible so that their requests can be processed by 29th March 2019. Many NCAs have also informed the entities that if they fail to submit their application by the end of July this year, the NCAs cannot confirm whether they will receive the authorization by 29th March next year.

The entities have also been reminded by ESMA that the processing of the applications is a lengthy process and it depends completely on the accuracy as well as the quality of their application. Plus, the entities also need to contact the ESMA or respective NCAs regarding CRAs and TRs as soon as possible. In short, ESMA is inviting every UK entity that is looking forward to relocating in EU27 to complete the proceedings in order to be assured of the successful completion of the relocation process.


The Latest Cryptocurrency Regulation Updates

Russia:

The Russian government has been working towards adopting new technologies and benefit of its citizens. Ensuring digital rights of the people of Russia has thus been one of the major issues on which government has focused greatly. So, it did not come as a shock to the world when Russia decided to legalize the cryptocurrencies. As per the reports received from the Russian Press, the government is planning to cite the cryptocurrencies as a digital right and they will be labelled as digital money or currency. Labelling the cryptocurrencies as digital money is a smart move that Kremlin has taken to include the cryptocurrencies under taxation according to Head of State Duma Financial Market Committee, Anatoly Aksakov. Mr Aksakov also confirmed that cryptocurrencies will be taxed under a completely new category of "Digital Property Rights". Thus, it will help the government to separate it from simple property rights.

Being a huge supporter of cryptocurrencies, Russia has been proactive in vocalizing towards the legalisation of cryptocurrencies across the world for a long time now. Given the fact that Russian Universities have already started offering cryptocurrency courses and now this latest development in the matter, it does not seem unbelievable that Russian wants to introduce its very own crypto-coin in the near future.

USA:

As per the recent reports from Washington, the US government has declared that the cryptocurrencies can no longer be regarded as assets or securities. The US Securities and Exchange Commission or SEC has recently declared that the cryptocurrencies like Bitcoin or Ethereum are to be classified as commodities instead of how they were classified in the past.

China:

It was reported last year that the Chinese Government and the People's Bank of China had decided to ban the ICOs and other cryptocurrency exchanges. The certain development caused the cryptocurrency market to collapse immediately. However, it has been recently reported that the Chinese Government is working on developing their very own digital currency. Interestingly, the People's Bank of China has recently patented 40 different cryptocurrencies.

However, the government does not intend to provide the complete freedom that cryptocurrencies provide in the digital currency that they are developing. Hence, they are amalgamating the features of real-world currencies along with the features of cryptocurrencies to develop unique currencies that will help them to stay competitive in the market.

The upsurge in the cryptocurrency market created troubles for the governments as well as the authorities on deciding the right way to categorize the cryptocurrencies. While the prospects that these blockchain powered cryptocurrencies offer are captivating, the governments and authorities across the world are yet to reach a proper consensus on the matter.


ESMA Announces the Dates For New Rules on Forex Trading

EU wide regulator ESMA has announced the dates from when it is going to enforce new regulations regarding forex, CFD and binary options trading. I shared two different updates in last few months about the ESMA's decision to lower leverage, ban binary options trading and introduce restrictions on bonus and promotions offered by the forex brokers.

ESMA to Limit Leverage at 30:1, Ban Binary Options

ESMA Proposes to Lower Leverage to 30:1 in Europe

The new rules were formalized by ESMA in late March after a long and thorough consultation period with industry representatives and authorities.

The dates from when new measures and rules will take effect;

July 2, 2018

  • Ban on the marketing and provision of sales of binary options to retail investors.

August 1, 2018 –

  • Lowering maximum leverage to 30:1 for forex majors, 20:1 for non-major pairs, gold and major world indices, 10:1 for non-gold commodities and non-major equity indices, 2:1 for crypto currencies,
  • Introducing negative balance protection on every forex trading account,
  • Bringing a standard stop-out level of 50% on every forex trading account,
  • Restrictions on bonus and promotions provided by forex brokers to the traders

MiFIR (Markets in Financial Instruments) empowers ESMA to enforce temporary intervention rules on a three monthly basis. This means that ESMA will review and evaluate the outcomes of the new rules prior to the end of three months in order to decide whether to extend them for another three months.

EU wide regulator ESMA has announced the dates from when it is going to enforce new regulations regarding forex, CFD and binary options trading. I shared two different updates in last few months about the ESMA's decision to lower leverage, ban binary options trading and introduce restrictions on bonus and promotions offered by the forex brokers.

Steven Maijoor, ESMA Chair, explained:

The measures ESMA has taken today are a significant step towards greater investor protection in the EU.  The new measures on CFDs will, for the first time, ensure that investors cannot lose more money than they put in, restrict the use of leverage and incentives, and provide understandable risk warnings for investors.

ESMA’s prohibition on the marketing, distribution or sale of binary options to retail investors addresses the significant investor protection concerns caused by the characteristics of this product.

NCAs will monitor the impact of these measures during their application and will assess, with ESMA, what next steps are required.

On an additional note, Cypriot financial watchdog CySEC clarified that new rules including lower leverage and restrictions on promotions would also apply to non-EU citizens following the great volume of inquiries on this issue.