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Some unscrupulous marketing strategies to fight competitors have been known to the business community for many decades. Unfortunately, on some occasions it is quite easy to mislead unsuspected customers and general public by publishing false and imprecise information. In some cases, however, such techniques are employed with a deliberate target to harm competitors’ reputation and their clients’ trust. Indeed on 17th of June 2009 forex brokerage industry was informed about the decision of the Cyprus Securities and Exchange Commission (CySec) to oblige all companies that deal with forex exchange trading to submit a relevant application to CySec and obtain investment firm authorization. Extract from the original text of the announcement can be seen below: ‘The Commission decided that the foreign exchange trading transactions which: (a) are not materially settled in cash but the change of the position of the client is anticipated, e.g. ‘rolling spot forex contracts’ or (b) have as an object of settlement the difference of value between two currencies, according to their differentiated exchange rates, and the object of settlement is exhausted by the client’s disbursed amount of daily security (margin, security deposit) constitute either futures according to the meaning of paragraph 4 of Part III, Third Appendix of the Law or contracts for differences according to the meaning of paragraph 9 of the aforementioned Part of the Law. Hence, the reception and transmission of orders and the execution of orders in relation to the specific financial instruments is considered to be an investment service which can only be provided by an authorized CIF. Therefore, the persons which provide the abovementioned activity of foreign exchange spot trading have the obligation to submit an application to the Commission in order to be granted CIF authorization. Additionally, the CIFs which today provide this activity as ‘other activity’ have the obligation to immediately apply to the Commission for the amendment of their relevant CIF authorization.” This was the first time the CySec specifically addressed the issue of foreign exchange trading, de facto placing it into the category of a major financial services activity, which requires licensing for all companies offering forex exchange trading and operating from the business premises located in Cyprus. This, however, does not apply to companies, which are registered outside Cyprus and do not have business premises or operations in Cyprus. Since internet forex exchange trading is a comparatively new business, which appeared along with the development of the Internet and modern communication technologies, the regulation of this activity is still not very much developed and in many countries no forex regulating legislation exists, even some popular jurisdictions such as British Virgin Islands (BVI), currently having on its registry over one and a half million companies, are only planning to introduce relevant legislation which will be regulating foreign exchange trading. The EU has harmonized its legislation for financial services sector by introducing The Markets in Financial Instruments Directive (MiFID) which provides regulation for investment services across the 30 member states of the European Economic Area (the 27 Member States of the European Union plus Iceland, Norway and Liechtenstein). As of the effective date, 1 November 2007, it replaced the Investment Services Directive. A good example of regulation of Forex business outside EU is Mauritius (regulator www.fscmauritius.org), Gibraltar (regulator www.fsc.gi), Channel Islands (regulator www.jerseyfsc.org, and www.gfsc.gg), which are on the so called OECD ‘white list’, and which implement stringent Anti Money Laundering legislation, have developed regulations system exercised by local Financial Services Authorities and enjoy a good reputation worldwide as international financial centers. (see the OECD ‘white list’ at http://www.oecd.org/dataoecd/50/0/43606256.pdf) At the moment, over 70% of the global retail forex exchange brokerage industry is still not regulated and continues to operate moving trillions of Dollars on a daily basis. Regulation is not an ultimate protection against potential losses, which fact is proved by the recent collapse of the pillar of investment industry such as Lehman Brothers, where investors have lost billions of dollars, or the Madoff investment scandal of 2008 where investors were simply defrauded by the ‘Wall Street blue cheap’ investment house, which was regulated by the most reputable world financial authorities. This list of defaults of stringent regulations can be continued… There is no ultimate protection and investors are advised to be prudent, exercise a cautious approach and common business sense and logic when selecting their forex broker, investment or trading house, no matter how, where and by whom it is regulated. It is always good to read professional forums, speak to or see the office of a potential broker, building relationship on a step-by-step solid and balanced basis. FXOpen Investments Inc. is now one of the largest Forex brokers in the world enjoying unprecedented growth with more than 130,000 active accounts and over $55 billion in traded volume passing through its platform on a monthly basis. FXOpen is one of the world's largest Metatrader innovators having introduced the first ever MT4 ECN with PAMM accounts and decimal lot trading. FXOpen would like to wish you all a very Merry Christmas and a Happy New Year! May 2010 bring you more profitable trades, successful market analyses and predictions, perfect connections and many fruitful market discussions with your friends and fellow traders. May the new year also bring you good fortune for your friends and families. Have safe and merry celebrations in this silly season. To our Financial Success! FXOpen Team
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