Post-Brexit World. Which EU country will become the new CFD capital?

Last Updated on Thursday, 25 February, 2021 at 9:52 am by Andre Camilleri

• London used to be the main FX/CFD trading hub in the European Union

In the latest edition of the Quarterly Intelligence Report by Finance Magnates Intelligence, precisely 24% of respondents believe that Malta will take over a large part of the brokerage business, followed by Germany (16%) and France (13%). The last piece of the brokerage pie is expected to be filled by the CEE market, with Poland and others mentioned.

In contrast to other EU countries, Poland offers an additional retail clients category with a higher price-to-book ratio. According to the survey, industry experts believe Cyprus, which is already the leading and most popular licensing jurisdiction for brokers looking to locate in Continental Europe, stands to gain the most from the changes (35%).  The report examines which representatives of brokerage firms directly involved in European operations think about the changes that may await the market as the Brexit transition period ends.

Speaking to Finance Magnates, Natalia Zakharova, Head of Sales at FXOpen, said. “I do believe Malta and Cyprus have a lot of potentials; however, it all comes down to the fine balance between protecting client interests and leaving some freedom to the brokers. Whoever does this best ultimately wins,”

2021 brought about the end of the Brexit transition period, finally confirming the UK’s exit from the EU. The changes also affected companies operating in the financial markets, including the retail FX/CFD sector, brokers, and their clients. Market experts wonder which jurisdiction can take over from London as the trading capital in Europe and the most common bets include Cyprus, Malta, Germany, and France, but CEE countries may further benefit due to their low costs of managing a business.

Finance Magnante state, London’s dominance is diminishing, but Forex Hub City is still hard to replace. Commenting to Finance Magnates on the possible end of London’s reign, Graeme Watkins, CEO at Valutrades Limited, said: “I don’t think this is the case at all. London has 200 years of history as a financial centre. Having a UK FCA license and offices in London is still a sign of credibility valued in many parts of the world, not just Europe. Brokers will indeed move some of their business to Europe, but so far, I have not seen anyone closing down their UK entities, and I believe the interest is still to have both the UK and European license.”

London’s weakening position in the FX market trading was confirmed, among others, by the triennial report published in August 2020 by the Bank of England. Daily foreign exchange trading volumes in London have shrunk by 16 per cent from the prior year to $2.41 trillion in April 2020. The decline in the city’s average daily volume was broad-based and was reported across almost all currency pairs, instrument types, counterparty types, and execution methods.

Finance Magnate concludes regardless of location decisions and regulatory changes, due to the lack of passporting, the Coronavirus volatility that fuelled record volumes and broker profits last year should continue into 2021.

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