Richard Elston, head of Institutional at CMC Markets, spoke to FX Week in January 2020 to explain more about the tide of regulatory change that had swept across the market in the preceding months. Although regulations are always evolving, the previous months had seen a marked uptick in the pace of change, with Mifid II, ESMA and the Global FX Code each playing a role.
Elston notes however that the changes, whilst potentially disruptive in the short term, will bring benefits in the future as market quality is improved, both at a retail and wholesale level. One clear message emerging is that those brokers looking to make shortcuts by licensing themselves offshore are now finding that such approaches simply won’t be tolerated. They need to either lift business back to the high standard that respects both the letter and the spirit intended by top tier regulators – or risk becoming marginalised in terms of who they can work with.
There may be some concern that the approach favours legacy industry participants and those with the better tier one liquidity relationships, but regulated firms need to be able to guarantee continuity so whilst this may do no favours for smaller, more agile brokers, it seems destined to improve the trading experience all round.