CySEC has extended its license upgrade deadline after some brokerage firms failed to submit their application on the earlier deadline of 14th of September.
The Cyprus Securities and Exchange Commission (CySEC)- the financial markets regulatory body in Cyprus, is working actively with brokerage firms to ensure the policy of negative balance trade (NBP). The latest move by the Cypriot regulatory watchdog comes to make sure that companies own the correct license, to operate and are also effectively capitalized.
The step CySEC made is divided in two different directions. One of the directions mandates brokers to either upgrade to a market-making license or transfer the policy of negative balance to their wholesale partners.
Deadline Extended for CySEC License Upgrade
The Cyprus watchdog urged brokers to follow suit as the deadline to get the new license was until 14th of September. However, not every broker was able to submit their applications promptly based on the high demand. At the moment, CySEC has extended the deadline. Brokers now have until the end of October to upgrade their license.
While this process takes some, as it requires additional capital, some brokers who provide prime of prime service have been asking their clients to accept the negative balance protection.
Meanwhile, the UK Financial Conduct Authority (FCA) has not turned a blind eye to the matter. For several months, the FCA has been vigilant in monitoring the matter as it has earnestly urged brokers to upgrade their license. Nevertheless, the regulator is not officially mandating the changes yet.
In the UK, several brokerage firms have already upgraded their licenses as required to the full €730K permit. Further, apart from complying with the recommendation from the regulator, the firms are permitted to carry out market making activities.
So far, market making has apparently demonstrated to be a capital intensive effort in the current environment. Brokers put themselves at a risk if they fail to pay sufficient attention to risk management.
Negative Balance Protection
Moreover, brokers who were hesitant in upgrading their licenses have been given another alternative. They can now hand over the NBP requirement to their liquidity counterparts, looking at it from a risk management perspective of prime of prime brokerage companies.
From the negative aspect, brokers who need the upgraded license might be required to provide further access to secured client identities.
In order to manage risk effectively, prime of primes should be able to have access and monitor individual accounts.
The conditions for providing NBP by prime brokerages might include a certain number of clients or volumes and an API which gives access to the broker’s backend.
Earlier, CySEC had announced that it issued several warnings with regard to Brisk Liquidity, Binatex, and Primus Trade. The regulator made it public to investors, that Brisk Liquidity Ltd uses on its website www.briskliquidity.nz the name of Cyprus Investment Firm (“CIF”) Globia Wealth Ltd, where in reality, there is no connection between the two companies.
The watchdog also sated that it did not issue Brisk Liquidity Ltd a license for the provision of investment services and/or investment activities, as provided for in Article 5 of Law 87 (I) / 2017.
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