Cyprus-based brokerage group Robomarkets said in a statement on Monday that it has decided to stop dealing with retail clients in contracts for difference (CFDs) in the European Union.
Instead the brokerage firm said that it will focus on stockbroking services via its German-regulated entity. The company’s firm in Cyprus, which is regulated by the Cyprus Securities and Exchange Commission (CySEC), will only act as a liquidity provider to other firms.
“Moving forward, RoboMarkets Deutschland GmbH will continuously expand its stock offerings and markets, optimise trading conditions, and maintain a stable, competitive, and attractive environment for clients,” said RoboMarkets Deutschland Director Vanyo Walter.
“We believe the market for self-investing and trading in stocks will grow significantly in Europe, and we are committed to becoming one of the leading stockbrokers in the region.”
The move comes at an interesting juncture for brokers in Europe. Many firms appear to only be sending very small levels of flow through their CySEC entities.
That’s because a large number of firms have now moved to open entities in places like the Seychelles and Mauritius. They then use those entities to target traders in emerging markets. For example, Robomarkets’ Seychelles entity appears to primarily be getting traffic from LATAM and ASEAN countries today.
A CySEC license can be useful for branding and banking purposes. However, TradeInformer understands that the regulator has put pressure on firms to stop these sorts of practices.
The result is that firms who ostensibly have a license for retail clients in Europe, but who are not really using it for any meaningful business, are being put under pressure by the regulator to hand back their license or make other changes.
Whether that applies to Robomarkets or not is hard to say. The move to keep a German entity and focus on stock trading is an interesting one, particularly as the margins in that sector are much lower than with CFDs. Moreover, most brokers that have launched stock trading appear to have done so purely as a means to cross-sell other, more profitable products.
It’s plausible that Robomarkets could end up offering exchange-traded derivatives via the entity. The company still has a lot of marketing partnerships focused on the German market too, suggesting this is not just some sort of temporary measure that the broker has taken prior to shutting down operations totally.