Speak to cTrader at the Forex Expo in Dubai next week!
Brief note – I will be at the Forex Expo next week in Dubai.
We also have a new podcast out with Jeremy Kinstlinger and Elan Bension, the Co-Founders of retail broker Afterprime and liquidity provider Argamon.
We talk about what the guys have been up to with the launch of Afterprime as a new brokerage brand.
A lot of the discussion is on liquidity / market making and how Argamon provides better pricing to clients and passes flow through to LPs. One for the trading nerds. Listen below.
Stop getting Arb’d, start using Centroid Solutions
Over the last couple of months, you may have seen some news about CySEC and IC Markets.
The company was issued with a €200,000 fine by the regulator in July. IC Markets is disputing that ruling, claiming CySEC didn’t look at or confirm certain facts and instead based its opinion on the testimony of a disgruntled former employee.
Whatever the case, IC Markets Founder and CEO Andrew Budzinski has implied that he will shut his office in Cyprus and move his business elsewhere. An article on a website called the Industry Spread quotes him (emphasis mine) as saying:
“Our likely divestment in Cyprus will allow us to heavily expand our operations. Change is in the air, and it’s time for the industry to move on to greener pastures.”
We understand that Budzinski has already left the country and moved to Dubai. He is selling his properties in the country as well. There are no current vacancies at IC Markets’ Cyprus entity and TradeInformer understands that hires are being made in Dubai.
A couple of months ago, we looked at the number of people that this industry employs in Cyprus. The total I came to was about 7,000, although the true number is almost certainly higher. Much as I dislike block quoting myself, one of the points I made at the end of that piece was this:
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 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.
If you look above then you can see the ten largest broker employers in Cyprus today. Of those 10, it is likely that only eToro and Freedom 24 are doing the bulk of their business in Europe.
The others either get a tiny proportion of overall revenue from EU clients or don’t accept them at all. It’s also worth noting that Freedom 24 is part of a massive conglomerate, of which EU business is only a small proportion.
So if IC Markets does actually completely divest from Cyprus then it has two consequences.
One is that, if it works, it’s proof it can be done. There’s a great book called ‘Among the Thugs’ which is a study on crowd violence at football matches. A key point the author makes is that it only takes one person to stand out from the crowd and begin being violent for everyone else to join in. The same herd mentality exists in the corporate world. If brokers see one firm moving out of Cyprus they’ll know they can do the same thing.
The second consequence is that it puts more power in the hands of brokers. If CySEC came to a broker and is trying to punish them in some way, they can go ‘ok, well you saw what IC Markets did, we’ll follow them’. Not a nice situation to be in.
I don’t want to massively overstate this. For example, the human capital factor in Cyprus isn’t going away. There also appear to be payments benefits that you accrue from having a license there, among other things.
However, the point remains that today firms are much more able to move if they want to. The fact that the biggest expo events all now seem to take place in Dubai and not Cyprus is one sign of the change in the air that Budzinski referred to. Even if his firm leaving the country isn’t the end, it’s a sign that the sector – and employment it brings – cannot be taken for granted.
