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Juhi Banu

6 October 2017

Regulation Forex

MFSA Forex brokers license MiFID II concerns


Malta watchdog calls to upgrade license of CFDs and FX brokers ahead of MiFID II. It says firms will carefully review their trading behavior to limit any unnecessary exposure as a result of becoming an SI. So, the watchdog releases circular concerning about MFSA Forex brokers license.

6 October, AtoZForex - The Malta watchdog urges the financial firms to upgrade their investment services license, allowing the firms to meet their MiFID II requirements.

MFSA Forex brokers license concerns ahead of MiFID II

Malta Financial Services Authority (MFSA) has published a circular about the changes in the licenses of the firms under MiFID II. The statement concerns existing license holders of Investment Services license. Also, it concerns those firms that offer contracts for differences (CFDs) and spot forex contracts under the MiFID regime.

More specifically, the purpose of this circular is to draw the attention of this segment to evaluate the upcoming rules. Especially to determine whether their activities would still remain in line with their license and the provisions of MiFID II.

The aim of this circular is to address the regulatory challenges of the systematic internaliser (SI) regime. An investment firm will be an SI if it executes client orders on its own account or through a Multilateral Trading Facilities (MTF).

According to the circular, the Recital 19 is not limited to an internal matching of client orders through matched principal trading. But more generally it prevents SIs from operating any system. Thus, will help to bring together third-party buying and selling interests in the same way as a trading venue.

Details of the MFSA MiFID II license upgrade

The Category 2 license in Malta allows the licensee to provide all investment services, including the holding of clients’ funds.  As such, the regulator obliges license holders which operate on a matched-principal basis. And it will undertake the activity of ‘dealing on own account’ following the implementation of MiFID II. However, it will help to apply for the necessary extension of the current Investment Services Licence to a Category 3.

The MFSA’s statement assumes that license holders can underestimate if they will qualify for SIs status. As an example, if a forex or CFDs brokerage firm considered as SI for a specific product, this will bring further requirements to provide its competent authority in trading of financial instruments.

It’s difficult to predict how forex and CFDs providers in Malta will react after MiFID II implementation. Moreover, it’s reasonable to assume that they will carefully review their trading behavior to limit any unnecessary exposure. As a result of becoming an SI, it may lead to minimizing the product portfolio offered to their clients.

One thing is certain, the proposed rules present greater operational complexity in meeting the challenge of determining SI status. Further, it has become critical for investment firms to maintain relationships with regulated trading facilities to meet their transparency obligations.

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MiFID ii MFSA systematic internaliser license

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