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Two decades ago Cyprus joined the European Union (EU). Three years later the European Securities and Markets Authority (ESMA) rolled out the first MiFID regulations. Although passporting already existed, these rules solidified the idea that firms in one EU jurisdiction could provide financial services in another.
Combined these two factors provided the legal framework which would allow Cyprus to become a hub for the CFD industry – or ‘forex’ as everyone on the island seems to (misleadingly) call it.
For those of you who have yet to visit the country’s heralded shores, it can be easy to miss how visible a part of life the industry is there, particularly in Limassol. Exness’s office is gigantic and in the middle of the town, as is XM’s. You see tech provider billboards dotted along the motorway and giant signs of broker brands glued on to offices across the city. Last time I was at Larnaca airport there were ads for CFI Financial, Scope Markets, and some weird trading news website.
So this got me thinking – how many people actually work in the industry over there? I’m not going to bore you with more preamble, so the figure I reached is 6,696 and I imagine the ‘true’ number is higher than that.
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To put that in some context, CyStat, the Cypriot government statistics agency, found that there were just under 461,000 people employed in Cyprus in Q1 of this year. However, about 55,000 people work for the state. When you factor that in, it means that there are about 406,000 private employees and self-employed people in Cyprus today, working both part and full-time.
This means that the CFD industry employs roughly 1.65% of the Cypriot workforce, excluding government workers. To draw a comparison with the UK, that would be the equivalent of almost half a million people being employed by this industry – a huge amount, which very clearly isn’t the case.
To add further context, one data point I have seen from Cyprus Profile is that the financial services industry employs about 20,000 people in Cyprus. This means that potentially upwards of 40% of the Cypriot financial services industry is made up of companies that earn their money from FX/CFDs.
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How did you figure this out?
The first question you’re probably going to have is how we worked this out. In simple terms – LinkedIn.
When I started doing this, I figured I’d just ask companies how many people worked for them. But when people got back to me I found that if you compared the numbers being given to me with how many people on LinkedIn claimed to (1) work for this company and (2) be living in Cyprus, the numbers were consistent.
For example, the figures that IG Group, Capital.com, eToro, Exness, and two other smaller brokers gave me matched their figures on LinkedIn. One other broker even said to just look at their LinkedIn when I asked for a number, as the figure there is accurate.
Another way of testing this was to just trawl through a looooooot of pages for brokers and other companies to see if there were an outsized number of random people claiming to be ‘forex traders’ or ‘fund managers’ at brokers or similar companies. This happens a lot but almost never when you filter down to people who have their profile set to being in Cyprus.
My conclusion is that there are lots of random people who claim to work at brokers on LinkedIn, usually as a ‘trader’. However, these people rarely change their profile to also claim they live in Cyprus because…why would you? As a result, the data available is much ‘cleaner’ than it would be if you were looking at companies on a global level.
This analysis was also quite easy to do for brokers because CySEC has an easy to access list of every company it regulates. The result is that finding firms is much easier than it would be in the UK or other jurisdictions where they only make up a tiny proportion of the overall number of regulated entities.
I then added in offshore firms that have a presence in Cyprus, mainly from Mauritius and the Seychelles, as well as firms that provide ancillary services to the industry. This was primarily legal and technology companies. The total was 6,696.
That figure was split between 6,036 working at brokers and LPs. The remaining 660 worked at ancillary service providers.
Why I think it’s higher than this
I wouldn’t be surprised if the ‘true’ figure topped out at something like 7,500. The reason for this is that it’s difficult to capture every offshore brand which also has a presence in Cyprus. I’ve likely missed some ancillary service providers as well.
However, I don’t think there are any major players, either on the broker side or service provider side, that I have missed. Thus if that number was substantially more than 1,000 higher than the figure I reached I’d be surprised. As an aside, and not mentioning names, there are at least four very big players, who operate brands almost entirely anonymously, that are based in Cyprus. These are captured in the broker numbers I put together.
Interesting facts
1. The number of companies
There were a few things that struck me both about the industry as a whole and individual companies. With regard to the former, it was really just how many companies there are on the broker and LP side that have operations in Cyprus. The total figure I got was 182. That is a lot!
2. Exness is gigantic
This probably isn’t such a shock to anyone but Exness is very big. They employ close to 850 people in Cyprus.
This makes them by some margin the biggest employer in the industry, at least in Cyprus. It also means they are one of the largest private employers in Cyprus. My estimate is that they are almost definitely in the top 30 and possibly in the top 20, although I think that’s probably a stretch.
To draw another comparison, I believe IG Group is the biggest broker in the UK and they ‘only’ employ about 750 people in their UK office. So Exness has more people in Cyprus than IG Group does in London.
3. XM is also yuuuge
XM has an office right next to Exness’s and you sometimes wonder if Exness employees might go on to their Marina office balcony and throw things at XM. Who knows.
Anyway, XM employs 466 people in Cyprus according to LinkedIn data. That makes them the second-largest employer in the industry.
4. Windsor Brokers
Maybe this is a total oversight on my part and I haven’t spent enough time in Limassol but one thing that was interesting was that Windsor Brokers has almost 150 people working for them in Cyprus. Not just that but they have an entire office building that they use. This is not a company that comes on my radar a lot so I was surprised to see how large they are.
5. 10 largest brokers by employee numbers
Below you can see the largest brokers by employee numbers in Cyprus. Note that Quadcode is the owner of IQ Option.
Punching above its weight
As I hope I’ve managed to convey, the number of people involved in this industry would be large in any country but a bigger factor is its overall size relative to the wider Cypriot workforce. Seen in that light, this industry is a much more important employer relative to somewhere like the UK or Australia.
In the UK, spread betting and CFDs are a small(ish) part of a much larger financial services industry. In Cyprus, banks employ 7,400 people, according to consulting group EY. This means CFD firms and ancillary service providers could employ as many people in Cyprus as the country’s banking industry does. It may even be more.
Another thing to think about here is earnings relative to GDP. World Bank data suggests Cyprus has a GDP of c.$30bn in nominal terms.
When we last looked at XM’s accounts, the holding group entity made just over €325m in net income. In other words, one company in this industry – admittedly one of the largest – made more than 1% of Cypriot GDP in net income. There is simply no comparison here with any other country. Cypriot CFD firms earn much more, relative to the wider economy, than they do anywhere else.
XM shareholders also received just under €130m in dividend income in April 2022. This is a huge amount anyway but it must mean the owners are among the wealthiest people in Cyprus.
Moreover, unlike other wealthy ‘Cypriots’, who just buy their passports but never live there, broker owners tend to actually live in the country. The money they earn is thus much more likely to feed into the local economy, in a way that is unlikely to happen with someone like John Fredriksen or Teddy Sagi.
That is also true on the corporate level. A lot of brokers now have entities in places like the Seychelles, Mauritius and Vanuatu. However, there are zero offices comparable in size to those in Cyprus in any of these regions. Moreover, XM’s accounts suggests that earnings from these entities ultimately flow back to Cyprus. This appears to be true of many other large providers, Exness for example, as well.
Here to stay
Although there has been some talk about the industry moving to Dubai, I don’t know if this will be easy to achieve. Many of the bigger firms are owned by locals or by people who have acquired Cypriot citizenship and seem to have no intention of moving elsewhere.
More importantly, it is not easy to replicate the human capital that Cyprus now has. You cannot, for example, create hundreds of new people that understand dealing desk dynamics out of thin air. Nor would it be easy to transplant all of these people from Cyprus to Dubai. A similar dynamic exists with Malta and the gambling industry.
There is also likely a ‘virtuous circle’ at play here. With more people based in Cyprus, there is more incentive to set up there. And as more people move into the industry, they acquire more knowledge and so on. Again, this is difficult to replicate.
It’s also worth highlighting the other benefits. Cyprus is in the European Union, which, for all its problems, many people value. There is also a path to residency and citizenship, even if it’s a rockier one than other EU states.
Dubai is probably the main competitor to Cyprus and it does not offer these benefits. In fact, it seems like most people moving to Dubai are coming from the UK or other European countries, not Cyprus, and that is as much due to them being fed up with high tax, high house prices, poor public services, and crime, as it is with opportunities in this industry.
The main risk Cyprus may face is actually the deterioration of the EU market. Many brokers are no longer interested in targeting clients in the EU due to the regulatory burden. As such, some have handed back their licenses or have been forced to do so. The result is that although Cyprus has maintained an edge as a source of labour, it is no longer as attractive from a regulatory point of view. Having said that, providers that do only target non-EU clients continue to have large offices there – as the graph above shows.
As the above indicates, it is also in the interest of the Cypriot authorities to keep the industry there. Not only is it a major employer, it brings a lot of cash to the island.
You are also seeing, in some instances, that money being reinvested into other technology ventures on the island. There are now several software development and investment groups which are tied, in some way, to the CFD industry. Again, given that every country in the world wants to be a tech hub, it is hard to see why Cypriot authorities would not want to encourage this.