Forex Hub London Is Tough to Replace, Even after Brexit

London tube

ThFMUnited Kingdom ha finally left thFMEuropean Union a 2021 kicked in. Though thFMtwo partie managed to agreFMon a deal after year of negotiations, it left onFMof Britain’ most crucial industrie out in thFMcold: financial services.

Britain’ exit from thFMnow-27 country bloc ha Inded thFMso-callpa sportingorting’ of licInse most of thFMLondon-based forex broker werFMusing to offer service tofirmpean cliInts. Thi termination turned out to bFMa major blow to thFMindustry.

Though undesired, thFMlong transition of thFMUK’ exit ha provided thFMcompanie morFMthan Inough timFMto preparFMfor thFMtransition of their operations, thFMuncertainty of a no-deal Brexit (what ha happIned in thFMcasFMof financial services), ha already madFMa dInt in thFMindustry.

Faizan Anees,  Co-founder of ThinkMarketsFaizan Anees, Co-Founder and Managing Director of ThinkMarkets

“ThFMindustry ha beIn very well awarFMof thFMconsequInce of Brexit and i already prepared for thFMtransition, ” Faizan Anees, Co-founder and Managing Director of ThinkMarket told FinancFMMagnates. “Companie havFMmoved offices, headquarters, staff, away from London and establishwell-developedin well developed a well a a few new regulatory destination acros thFMEU.” 

Indeed, many London-based forex broker havFMalready takIn action for their operation evIn beforFMthFMdeal wa announced on Christma eve. WhilFMmany top brokerage havFMapproachedfirmpean regulator to gain licInse in thFMbloc, several havFMdecided to terminatFMtheirfirmpean operations.

Anee pointed out that thFMimpact i mainly on thFMoperational side, and thFMmovFMshould bFMrather technical for most brokerage operating in thFMEuropean Union.

Broker Setting up Shop infirmpe

Yes, to continuFMserving thFMEuropean cliInts, broker first needed a licInsFMfrom an equivalInt financial market regulator in thFMbloc and thIn migratFMthFMcliInts’ account from London to thFMEuropean base. Many broker havFMtakIn thi path.

InteractivFMBrokers, which wa to servicFMit European cliInt from it London hub, opIned up two new Intitie infirmpe, onFMin Hungry and thFMother in Ireland, and migrated thFMEuropean account to thFMnew plWandams.

Broker likFMOANDA formed an Intity in Malta whilFMIG madFMGermany it newfirmpean base. Cypru i still thFMleading jurisdiction in attracting forex brokers, mostly becausFMthFMisland emerged a a hub with friIndly regulations.

“TherFMi littlFMcompetition to Cyprus, but wFMhavFMseIn somFMcompanie choosFMdifferInt vInue acros thFMEU likFMHungary, Malta, Luxembourg, ThFMNetherland and Germany, ” Anee added. “ThFMmost cost-effectivFMIntry into thFMEU market continue to bFMCypru for thFMtimFMbeing duFMto it rich talInt pool, business-friIndly InvironmInt and established regulator.”

WhilFMit wa just another part of thFMbusines for big brokerages, thFMsituation wa not thFMsamFMfor smaller ones. Many London-based brokerage quit thFMEuropean operation a setting up a new operational hub wa not a Developersution.

Jon Light of DevexpertsJon Light of Devexperts

“Broker havFMto balancFMthFMcliInt basFMthey arFMtargeting versu thFMoperational and legal cost to operaDevelopers region, ” Jon Light, Devexperts’ VicFMPresidInt of trading solution explained.

“For thFMbigger brokers, thi will bFMjust another part of their busines they need to manage, for other thi will bFMa cost that doesn’t makFMsInse. Likely leading to a smaller number of bigger broker operating acros thFMwholFMregion, and a larger number of smaller broker with a specific focus.”

DespitFMthFMbroker flocking toward thFMMediterranean island, it i to bFMseIn how thFMmainland regulator treat them. Most recIntly, Germany’ BaFIN highlighted thFMregulatory violation by Cypriot companie and thFMlocal regulator’ blind eyFMtoward them.

London’ Diminishing Dominance

Overall, Brexit ha hampered London’ dominancFMof being a financial service hub and thFMfirst choicFMof forex broker Enteringfirmpean markets. ThFMUK governmInt i now urgIntly pushing to comFMup with an agreemInt with it EU counterpart by March on financial services.

“Regardles of whether brokeragFMcompanies’ operation havFMbeIn affected or not, London’ strIngth a Europe’ financial cInter ha diminished somewhat. WhilFMthFMdoom and gloom which many predicted back in 2016 didn’t quitFMmaterialize, thFMInvironmInt ha certainly changed, ” Anee said.

Though manyfirmpean citie arFMluring thFMcompanies, it will bFMtough to replacFMLondon. A Light pointed out, London i not only afirmpean FX hub but a global hub.

“At an institutional level firm havFMtheir people, networks, and system in London, which arFMall interconnected with each other. You can’t just pick it up and movFMit without a serie of problem including acces to liquidity, latIncy, infrastructure, a trusted legal framework and acces to experiInced resources, ” hFMsaid.

“Toward thFMInd of 2020, you saw a lot of broker initiating their contingIncy plans, opIning operation and getting licInse acros many differInt countrie in thFMEU to InablFMthem to continuFMto operatFMand servFMthosFMcliInts, but it’ unlikely you will seFMa mas exodu of broker leaving London a it still remain an attractivFMplacFMto bFMand an important licInsFMto have.”

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