BOARD

Brexit & FCA regulation

27 June 2016

As you possibly know, the UK voted “out” on the European Union membership referendum last week.

brexit-800x500

Many non UK customers are wondering about the implications for FCA (UK) regulated companies like Darwinex, who use a MiFID passport to operate in other EU countries.

Neither us nor our compliance advisors have the benefit of a crystal glass, but what we know is:

  1. Short term, until further instruction, it’s business as usual
  2. Medium term, 3 scenarios open up:
    1. Bregret: The UK decides that the outcome of the referendum wasn’t conclusive and backtrack
    2. Amiable divorce: UK – EU negotiations minimize change – no impact on investment activities
    3. Sour grapes: UK – EU exit negotiations turn sour, and UK leaves

Bregret

Whilst the outcome of the referendum was “out”, the result was narrow (51.9% vs. 49.1%) and unsurprisingly significant debate has emerged on whether a narrow simple majority outcome warrants the potential consequences of the exit effort.

At the time of writing, the UK has yet to formally invoke Article 50 in the Lisbon Treaty to request out of the EU. David Cameron has resigned and handed-over the decision to a new Conservative Leader – a successor unlikely to be found before October 2016.

A lot can happen between now and then…

Amiable divorce

Should the UK invoke article 50 the fact remains that:

  1. London is currently the EU’s unquestioned financial capital
  2. Most financial institutions in the EU had enough to worry about before Brexit
  3. In the event of a Brexit, most incumbents have more to lose by giving up the current status, than they have to win from any alternative set-up

Both sides to the table know this:

  1. The UK knows there’s an awful lot of jobs in South England at risk if London (and the FCA) loses their pre-eminent status
  2. The EU knows European Banks can ill afford another construction site looking for a new home to their capital markets activities

Which means: easiest way out would be to change everything for everything to remain the same. The Markets in Financial Instruments Directive (MiFID) is the master legislation that harmonises regulation for investment services… in the European Economic Area, which comprises the 28 EU member states plus Iceland, Norway and Liechtenstein.

If you ask a humble Fintech CEO, leaving MiFID as it is and applying it to 27 member states of the EU plus UK, Iceland, Norway and Liechtenstein looks like a relatively pain-free way out of the conundrum 🙂

In this scenario, when it comes to financial regulation, Brexit remain a wikipedia entry & a couple of weeks of stress in the market.

Sour grapes

Remainer or Leaver, the fact remains that a majority of UK citizens did vote to leave the EU.

The UK has sent a VERY clear message to European Union, and the message wasn’t lost on off-mainstream but growing political leaders in France, Netherlands, etc. who have requested follow-up referenda. This might tempt Ms Merkel into a hawkish stand on negotiation. Be tough with the Brits to fight off more referenda. The price to be paid would be sour divorce negotiations between the UK and EU: EU leaders would shoot the UK (hurt the City) in their own feet (EU banks would suffer the most).

Should grapes really turn sour, then thousands of European Financial institutions – including pretty much every European Fintech start-up – will seek a new home base to passport regulated activities into the remainder of the European Union. This will be a huge task with TONS of time wasted on tasks other than serving customers – which will imply a LOOOONGG transition period into an uncertain set-up.

Were this to happen, we’ll move giving plenty of notice & mutate into a legally new Darwinex, with the same old mission to serve active traders & investors.

The road from here: EVOLUTION!

Brexit or not, we still live in a world where the less you own, the worse you invest.

So, Mr. Cameron, Ms. Merkel, Mr. Johnson & Ms. Le Pen: go ahead and waste everybody’s time and money changing the fine print.

Meanwhile, we’ll continue to re-imagine the investing game: by the time the new UK Premier is even known and banks appoint their Brexit committees, we’ll have released a TON of functionality empowering active investors.

Bregret, Brexit or even end of the EU: the impact of Brexit on the independent traders’ movement is this blog-post.

Let’s face it, we’ve all got bigger fry going on.

Last News

General Election in New Zealand (23 September 2017)

21 September 2017

Please note that the New Zealand General Election is coming up this Saturday (23 September 2017). Voting closes at 8 am (UK time) and preliminary results begin to roll in in real-time immediately afterwards. The Electoral Commission’s target is to have 50% of polling station results available by 11 am (UK time) on election night and […]

Please note that the New Zealand General Election is coming up this Saturday (23 September 2017). Voting closes at 8 am (UK time) and preliminary results begin to roll in in real-time immediately afterwards. The Electoral Commission’s target is to have 50% of polling station results available by 11 am (UK time) on election night and 100% of results available by 12.30pm (UK time).

There is high uncertainty around the outcome of the election, which may result in market gapping in NZD pairs when market opens.

Please make sure you are comfortable with the open position exposure on your Darwinex account and that you have sufficient margin cover going into the weekend prior to market close at 22:00 (UK time) on Friday (22 September 2017).

As always, at info@darwinex.com we’ll be glad to assist you!

 

MiFID 2

Gearing up for MiFID 2: our preparations and plea to ESMA

19 September 2017

MifiD 2 – a pan-european piece of financial legislation applies from January 3rd, 2018. 10 years in the making, MifiD 2 builds on its predecessor, “to improve the functioning of financial markets, making them more efficient, resilient and transparent.” Whilst the overall scope of MiFID 2 is way beyond our scope … MiFID 2 & Retail Brokerage […]

MifiD 2 – a pan-european piece of financial legislation applies from January 3rd, 2018.

10 years in the making, MifiD 2 builds on its predecessor, “to improve the functioning of financial markets, making them more efficient, resilient and transparent.”

Whilst the overall scope of MiFID 2 is way beyond our scope …

MiFID 2 & Retail Brokerage

But does it affect the retail brokerage industry?

Quite a lot. ESMA, the Pan-european regulator behind MiFID2, has its eyes set on CFDs – intervening using rare legislative prerogatives reserved for “high priority” situations.

Why is that? Because retail trading has grown a lot (the trader movement is strong!). Unfortunately, it’s done so with teething problems that need fixing, pronto. In its statement, ESMA announces regime changes combining (and hopefully harmonising) the various measures introduced by national regulators, including:

  1. Leverage limits,
  2. Guaranteed limits on client losses, and / or
  3. Restrictions on the marketing and distribution of these products.

National strategies so far – our take

If we were in ESMA’s shoes, we’d make retail OTC trading “efficient, resilient and transparent” by forcing CFDs on Exchange, because this would tame the conflict of interest between retail traders and market makers. Without conflict, who would want retail traders blowing up? What would be the point of leverage limits, guaranteed stop-losses or marketing restrictions? (Could this be why IG are working on their own MTF?).

If you want more insight on why, in our view, on Exchange is the only way:

The CFD dragon needs to be slain! – Darwinex

Alas, national regulators haven’t suggested on Exchange for now… so we hope whatever ESMA comes up with overcomes the limitations of:

  1. FCA: Leverage limits (NB the FCA has since delayed policy to follow ESMA)
  2. BaFin: Guaranteed limits on client losses as introduced in Germany…

MiFID 2 – the Darwinex way

In any case, we’re luckily not in ESMA’s shoes (not an easy job!). We’re in our own – and there’s plenty we can – and will – do in the meantime.

Since launching Darwinex broker 3 years ago, we’ve NEVER traded against customers (and NEVER will). Instead, we invest in them. Slowly but surely… the likes of NTI prove that listing independent traders creates an asset, and that investor leverage is the sustainable business model.

And yet, on Exchange or off Exchange, more and more people actively invest their savings. Which unfortunately also means too many gamble away more than they can afford. The problem is: too many quit before learning how to do it. Because that’s bad (for them and for us), we’re re-vamping on-boarding procedures for even more alignment and transparency.

Without disclosing methodology & parameters (this could incentivise people to “game” the system against their own best interest), available leverage for users will depend on:

  1. Proven or proveable experience/training when trading with leverage
  2. Solvency – because no-one should risk capital they can’t afford to lose

MiFID 2 – what it means in practice

NB: all users will be allowed to purchase DARWINs – within their stated risk appetite. This is because DARWINs are comparatively low leverage (rarely more than 5:1)

We will segment the Trading user base using both pieces of information, and transition from:

  1. Inappropriate -> the aspiring traders’ gaps in either or both criteria are too large. We won’t accept his trades until he’s ready (watch out for more news in the educational space)
  2. On transit -> it’s appropriate for the user to trade, but we will restrict the leverage he can deploy
  3. Unlocked -> user has acquired enough experience. We will offer him/her all the leverage available to customers at any given time

We will disclose our internal categorisation to customers so they know where they are in their evolution from “novice” to “maximum” leverage.

In addition to the above segmentation, we will apply two further controls:

  1. For investors: from day 1, the risk management engine tracks Equity at Risk (EaR) for every investor portfolio. Investors can’t buy more exposure than their maximum risk threshold at any point in time – investors can only sell once they reach the maximum threshold
  2. For all customers: we will track customers’ overall P&L (for trading and investing), informing them about it. We will also warn when the threshold is exceeded. And we may withdraw permission to trade if we feel it’s inappropriate for him/her to continue trading

Last, but not least, the restrictions apply to new customers only.

German General Election (24 September 2017)

Please note that German General Election is coming up this Sunday (24 September 2017). Exit polls are due to come out shortly after polling stations close at 17:00 (UK time) and preliminary results may be announced before Sunday market open 22:00 (UK time), which may result in market gapping in EUR related products. Please make […]

Please note that German General Election is coming up this Sunday (24 September 2017). Exit polls are due to come out shortly after polling stations close at 17:00 (UK time) and preliminary results may be announced before Sunday market open 22:00 (UK time), which may result in market gapping in EUR related products.

Please make sure you are comfortable with the open position exposure on your Darwinex account and that you have sufficient margin cover going into the weekend prior to market close at 22:00 (UK time) on Friday (22 September 2017).

As always, at info@darwinex.com we’ll be glad to assist you!

And the DarwinIA winners are…

1 September 2017

The August edition of our DarwinIA trading challenge came to its end. Below you can find the 48 winners of our € 4,000,000 notional allocation for a 6 month period. Place DARWIN August’s notional allocation 1st $CJN € 300,000.00 2nd $UYZ € 250,000.00 3rd $DLF € 210,000.00 4th $XGU € 170,000.00 5th $VQB € 150,000.00 6th […]

The August edition of our DarwinIA trading challenge came to its end. Below you can find the 48 winners of our € 4,000,000 notional allocation for a 6 month period.

Place DARWIN August’s notional allocation
1st $CJN € 300,000.00
2nd $UYZ € 250,000.00
3rd $DLF € 210,000.00
4th $XGU € 170,000.00
5th $VQB € 150,000.00
6th $JJP € 140,000.00
7th $XEC € 130,000.00
8th $LZL € 120,000.00
9th $OOC € 110,000.00
10th $LDR € 110,000.00
11th $LDZ € 110,000.00
12th $LVS € 100,000.00
13th $FTT € 100,000.00
14th $ERQ € 100,000.00
15th $PGH € 90,000.00
16th $QJW € 90,000.00
17th $DDY € 90,000.00
18th $HIB € 80,000.00
19th $KYQ € 80,000.00
20th $TTK € 80,000.00
21st $VTJ € 70,000.00
22nd $WPQ € 70,000.00
23rd $KAR € 70,000.00
24th $TOP € 70,000.00
25th $ELD € 60,000.00
26th $UEI € 60,000.00
27th $HFS € 60,000.00
28th $PFI € 60,000.00
29th $VFL € 60,000.00
30th $JCW € 60,000.00
31st $QTB € 50,000.00
32nd $HKM € 50,000.00
33rd $GPZ € 50,000.00
34th $PEW € 50,000.00
35th $XBX € 50,000.00
36th $YHN € 50,000.00
37th $BAN € 50,000.00
38th $LYX € 40,000.00
39th $JGC € 40,000.00
40th $AGD € 40,000.00
41st $SLR € 40,000.00
42nd $FGC € 40,000.00
43rd $RAO € 40,000.00
44th $THA € 40,000.00
45th $WZG € 30,000.00
46th $TKT € 30,000.00
47th $XMZ € 30,000.00
48th $RQH € 30,000.00

Updating our MT4 server

31 August 2017

Please note that we are updating our MT4 live server to Build 1090. Demo Server will be updated on 9 September 2017 and our Live Server will be updated on 24 September 2017. Should you experience any connectivity issue after the update, please click here to download the latest version of our MT4 terminal. Also, we […]

Please note that we are updating our MT4 live server to Build 1090. Demo Server will be updated on 9 September 2017 and our Live Server will be updated on 24 September 2017.

Should you experience any connectivity issue after the update, please click here to download the latest version of our MT4 terminal.

Also, we have been notified by MetaQuotes Software Corp. that as of 1 October 2017 (Sunday), support for MetaTrader 4 client terminal versions below 1065 will be discontinued, so please make sure you update your MT4 Terminal to the latest version before then.

Support for Windows XP, Windows 2003 and Windows Vista will be discontinued for the MetaTrader 4 platform on 1 October 2017, too. As potential hardware capabilities can no longer be recognised, these operating systems are considered to be outdated.

MetaQuotes has stated that Windows 7 is the minimum required operating system version for running MetaTrader 4. However, using the 64-bit versions of Windows 10 is strongly recommended.

Older versions of MetaTrader 4 will continue to work on Windows XP, Windows 2003 and Windows Vista. After 1 October 2017 (Sunday), updates will no longer be received and installers will not run on these operating systems. Without having your MetaTrader 4 up to date, you may not be able to execute trades or have guaranteed stability.

As always, feel free to contact info@darwinex.com if you have any questions or need a solution for this change!

Darwinex Amended Trading Hours due to U.S. Labour Day

Please note the amended Darwinex trading hours for the upcoming U.S. Labour Day on 4 September 2017 (all times are in UK time). Important: commodities will close 5 mins ahead of market close to avoid liquidity shortages.  Instrument Trading Hours  FX 22:05 Sun – 22:00 Mon   DARWINS 22:05 Sun – 22:00 Mon  COMMODITIES   Gold* […]

Please note the amended Darwinex trading hours for the upcoming U.S. Labour Day on 4 September 2017 (all times are in UK time).

Important: commodities will close 5 mins ahead of market close to avoid liquidity shortages.

 Instrument Trading Hours
 FX 22:05 Sun – 22:00 Mon
  DARWINS 22:05 Sun – 22:00 Mon
 COMMODITIES  
Gold* 23:00 Sun – 17:55 Mon
Silver* 23:00 Sun – 17:55 Mon
Platinum* 23:00 Sun – 17:55 Mon
Palladium* 23:00 Sun – 17:55 Mon
US Crude* 23:00 Sun – 17:40 Mon
Natural Gas* 23:00 Sun – 17:40 Mon
 INDICES  
Australia 200 23:00 Sun – 22:00 Mon
 Europe 50 23:00 Sun – 22:00 Mon
France 40 23:00 Sun – 22:00 Mon
Germany 30 07:00 – 21:00
Spain 35 08:00 – 19:00
Japan 225* 23:00 Sun – 18:00 Mon 
 UK 100 23:00 Sun – 22:00 Mon
 US SPX 500* 23:00 Sun – 18:00 Mon
 US Tech 100* 23:00 Sun – 18:00 Mon
Wall Street 30* 23:00 Sun – 18:00 Mon
*Amended Darwinex trading hours.

As always, at info@darwinex.com we’ll be happy to assist you!