Mille Lees Mille Lees, Friday 6th September 2019, 2:49 PM GMT+0000
Brexit

Brexit Costing Brokers Millions

Brexit, the never-ending story has once against captured headlines for different reasons than we typically see. The horrendous Prime Minister of Britain Boris Johnson has steered the country towards breaking from the European Union regardless of what fellow politicians of the people have to say. However, a Campaign to Remain has been becoming viral in the country and plans to override the Prime Minster’s decision. This would save the United Kingdom from billions in lost revenue, which applies to all industries, including the Blockchain and Cryptocurrency markets. Already, numerous brokerages have had to hire new employees and spend countless working hours revolving around new legislation to compete against Brexit. It’s cost these brokerages hundreds of thousands of dollars, and it’s anticipated that it’ll cost them millions in the long run. This substantial amount of funds hasn’t ever had to be re-invested by these brokerages before Brexit and shows that the marketplace is in a significant state of flux currently.

The Chief Financial Officer for Tickmill, IllimarMattus, commented on the state of brokerages in the Brexit landscape by saying: We have been putting parallel structures in place and even decided to keep other arrangements in place just for the sake of Brexit risk when doing this makes no business sense for us. We’ve had to hire more compliance and back-office people and figure out alternative payment solutions. But if there is a soft Brexit, there was no need to do this. It’s like preparing for a hurricane without knowing if it’s going to hit you.”

There are other members in the cryptocurrency community in Britain that have spoken out about these horrible conditions for the market. Peter Cruddas, the worldwide famous banker and philanthropist, also commented by stating: We don’t have to open an EU office because we’ve already got half a dozen anyway. We’d have to upgrade one of those offices, probably our Frankfurt office, and apply for full European status. There would be some logistical changes, but they’ll be minimal – maybe an additional couple of traders on-site.”

Peter Cruddas is the CEO for the CMC Group and for such a significant firm to receive the additional licensing agreement while hiring a series of new employees shows that even the largest firms fear what’s to come. It appears that Peter anticipated substantial costs to coincide with Brexit and that it’ll ultimately cost the firm millions. This won’t apply to the smaller brokerages in Britain, who will have to spend only a few hundred thousand euros to enhance their internal operations for the new landscape.

Advertising Concerns

The brokerages that choose to leave Britain will most likely move to operate in the European Union. This will require a new set of licenses for most firms, and also mean a series of new legislation on product marketing. These laws make it nearly impossible to advertise your products anywhere. It forces firms to rely on word of mouth or third-party advertising to showcase their products to potential new clients. However, due to the loopholes of this legislation, brokers are only mildly concerned with these new advertising laws.

AsafElimelech, the CEO of Plus500 spoke about the advertising laws in the European Union by stating: “In practice, brokers will be forbidden from advertising in the EU if the UK leaves with no deal, but I am expecting them to ignore the rules and continue doing it anyway. If that’s the case, I don’t know how much impact there will be on them.”

It appears that most of the focus is on the cost associated with the impact of Brexit. This applies to the retail trading industry, cryptocurrency industry and blockchain industry. There’s even the possibility that firms in the European Union will be affected by Boris Johnson’s decision. Why? Because the EU Firms won’t be able to engage with Britain-based brokerages anymore. A large portion of their contacts will permanently be lost, which is why countless firms in the EU are advocating for a solution to Brexit.

Salam Alaswad, the Former Chief Operating Officer for CTP Markets, stated: “If Brexit happened and we left the EU with or without a deal, at some point the passporting rights that all CFD firms in the EU are currently enjoying will cease to exist. Many brokers, who are not authorised by the FCA, are currently taking advantage of the passporting system and using their registration – not authorisation – with the FCA as a major selling point. Those firms are going to lose that ability and, as a result, a competitive edge that they’ve had over UK brokers for some time.”

Currently, it’s required that brokerages in the European Union manage all their clients through an entity that’s listed with the Financial Conduct Authority. Those brokers that aren’t able to are forced to go through offshore entities in Britain that are governed by licenses through Malta and Cyprus. However, these foreign entities will be terminated if Brexit is completed. Right now, everyone isn’t sure as to where the issue of Brexit will end. Brokers will likely spend millions before a solution is found.

Salam Alaswad ended his statements with, “A lot of our end clients have told us that they won’t do business with our Cypriot entity. It’s a big enough problem that we are probably going to be getting a new license in another EU country.”

Mille Lees

Author: Mille Lees

Millie has been with whichbroker.com since the start. She has a passion writing financial news after an internship at Bloomberg London. Millie's background in journalism and politics means she has an eye for a good story. Millie graduated from LSE and has a masters from Durham University England. Mille Lees can be contacted at [email protected], View all posts by Mille Lees

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