It is fascinating to watch the adoption of various processes that previously seemed unrealistic or challenging to achieve but are now becoming the norm. For example, obtaining a proper Forex licence or becoming a regulated broker is now almost a requirement.
Of course, the tightening of KYC on many leading trading platforms, most notably Metaquotes, has had a significant impact.
It’s now obligatory to have a regulated company with a licence or a legal opinion with a corporate bank account to be approved.
We are currently seeing a revival of the market and improvements in its quality and transparency. A new wave in the industry has been launched, a wave of understanding that regulation is not secondary or an indicator of elitism.
It is the norm.
It is the standard.
More and more brokers realise it will not be enough to create a company in one day for $200. Today, the question is not “Do I need a licence?” but rather:
“Which one is better?”
“How long am I willing to wait: a month, six months, a year?”
“Will it be St. Lucia or Comoros, Mauritius or Dubai?”
Prop trading companies have not been spared from this trend.
They also had to agree to these rules of the game, and now everything is on an equal footing.
However, a peculiarity has been noticed.
Companies that had to quickly become regulated were forced (due to finances or time) to apply for the most basic regulation (St Lucia, Comoros) and are now going a step further and upgrading their licences.
Why?
Several reasons:
- Credibility
- Client trust
- Access to more markets
- Double-secure method
A more reputable and regulated jurisdiction is now considered a competitive advantage. This will signal to clients and partners that they can trust and invest in your business by trading through you or by associating with your brand.
More laid-back jurisdictions don’t have that advantage. Sure, they get the ball rolling for you, but eventually, they become a roadblock and a constraint that has to be addressed.
Final thoughts on regulation for brokers and prop trading firms
Today’s market is not what it used to be even a year ago. Brokerages operate on a whole different level, and the quality of their services is higher than ever. The competition is ruthless, with more companies registering and launching operations, and they come with creative strategies and workflows.
While it’s not much more difficult to operate and be profitable, it’s much more stimulating. It’s like moving up in video game levels. The bosses are more challenging, and it’s harder to complete the mission, but it’s also much more rewarding.
Obtaining a licence and remaining compliant is like upgrading your shields and weapons. You can try and play without them, but you won’t climb the ranks and stand out.
