ESMA may be quite unusual for Stock investors, however it is the nightmare of Forex and CFD traders. However, the good thing about the regulator is the fact that it usually introduces temporary measures, instead of going all-out. However, now that Brexit is looming ever so closer, the UK may actually adopt those temporary measures and turn them into law. What can this do to most financial companies?
Firstly, we need to discuss what the restrictions actually are. According to the European Securities and Markets Authority’s (ESMA) paper about the whole ordeal, the restrictions exclusively target binary options, Forex and CFD brokers. Binary Options are completely banned while Forex and CFD products have a restriction on their marketing and selling operations.
So, what could happen to a company? Well, according to this Trade.com review, we can easily see that most brokerages delve into not only Currency pairs, but also various financial assets. Because of the permanent restrictions in a financial hub such as the UK, the companies may see a terrible loss in revenue. And we all know what happens to a company’s stock once it stops meeting the monthly quotas don’t we? All the major broekrage firms like Plus500 will see their stock price decrease drastically, after pretty much losing the UK market.
The only hope for these brokerages right now is to see a soft Brexit instead of hard Brexit. However, judging by the failed negotiations so far, a soft Brexit is becoming less and less of a possibility.