The recent scandal involving the HR startup
Deel and My Forex Funds has placed regulators once again under intense public
scrutiny. However, this time, it may not be entirely their fault.
The
involvement of My Forex Funds in unregulated propriety trading that
inadvertently ensnared Deel could potentially be more detrimental to the latter
than the recent investor turbulence experienced by Papaya Global. It should be
noted that compliance forms are not only the Achilles heel of financial
institutions but also constitute the core “make it or break it”
element for regulated firms.
Challenges to Prop Trading Firms
Regulating propriety trading has always
been a challenging task. In the EU, this type of trading had been somewhat
regulated under MiFID. However, with the introduction of the Investment Firms Directive (IFD), designed to
foster a lighter regulatory framework for propriety trading, the primary goal
was to alleviate market burdens, not create higher liquidity problems for
trading institutions in comparison to banks.
Unfortunately, since its
inception, the regulation of propriety trading has not been appropriately
overseen due to a deficiency in expertise. When a regulatory framework does not
foster competence that cannot be anchored to the Treaty on the Functioning of
the European Union (TFEU), it poses a problem for all market actors and
participants.
Currently, the EU finds itself in need of a
newer and more efficient regulatory framework. Yet, given that the EU
Commission’s primary focus appears to be on Ukraine (a state not meeting the
Copenhagen Criteria) and not on the EU Parliament’s proceedings, it is clear that
the present administration does not regard EU competence as a priority.
Moreover, with the President of the EU Parliament spending a considerable amount
of time in Ukraine, it amplifies the notion that governing and operating within
the EU’s jurisdiction isn’t their main concern at the moment.
Looks like Canada’s Ontario Securities Commission extended the #myforexfunds‘ order to October 31st. pic.twitter.com/Q6y3ZMS0AS
— Money Bird (@ItsATweetyBird) September 11, 2023
Varied Regulatory Stance
In stark contrast to their European
counterparts, American authorities are taking this issue seriously, playing a
significant role in unfolding Deel’s recent regulatory troubles. Meanwhile, the
Europeans seem to be on a protracted vacation, congregating in the
conflict-ridden city of Kiev.
Interestingly, the UAE has emerged as a
regulatory beacon amidst the regulatory failures of My Forex Funds. The Dubai
Multi Commodity Centre’s (DMCC) new crypto regulatory framework for propriety
trading has demonstrated itself to be both accessible and enduring, presenting
a neat clear-cut licensing path that can be achieved swiftly.
Important Notice 📢
Yesterday we learned that, without prior notice or discussion, a provincial securities regulator in Canada and the commodities regulator in the United States issued orders preventing us from trading securities or accessing funds in our bank accounts.
Until… pic.twitter.com/dKpxmx5axT
— MyForexFunds (@MyForexFunds) September 1, 2023
The grey listing
endured by the UAE over the past two years appears to have spurred them to
enhance their regulatory practices, including in the free zones, resulting in
agile and robust regulatory frameworks. These improvements could serve as a
model for the EU as they initiate a new Ordinary Legislative Procedure (OLP) on
propriety trading.
Looking ahead, the EU should aim to address
cases like that of My Forex Fund with the efficacy exhibited by their Emirati
counterparts in the DMCC, facilitating streamlined and foolproof licensing
processes. Excessive regulation through MiFID will not foster real market
developments and is more likely to induce disruption and regulatory arbitrage
than anticipated.
Perhaps, instead of venturing into issues beyond the purview
of the TFEU, the EU could learn from the approaches of the Commodity Futures Trading Commission (CFTC) and Deel, or
better yet, the UAE, which has repeatedly shown over a span of two years that
no goal is unattainable or mountain too high to climb. It is crucial to adapt
to the current needs, favoring sound regulatory frameworks over congested,
stifling regulations.
The recent scandal involving the HR startup
Deel and My Forex Funds has placed regulators once again under intense public
scrutiny. However, this time, it may not be entirely their fault.
The
involvement of My Forex Funds in unregulated propriety trading that
inadvertently ensnared Deel could potentially be more detrimental to the latter
than the recent investor turbulence experienced by Papaya Global. It should be
noted that compliance forms are not only the Achilles heel of financial
institutions but also constitute the core “make it or break it”
element for regulated firms.
Challenges to Prop Trading Firms
Regulating propriety trading has always
been a challenging task. In the EU, this type of trading had been somewhat
regulated under MiFID. However, with the introduction of the Investment Firms Directive (IFD), designed to
foster a lighter regulatory framework for propriety trading, the primary goal
was to alleviate market burdens, not create higher liquidity problems for
trading institutions in comparison to banks.
Unfortunately, since its
inception, the regulation of propriety trading has not been appropriately
overseen due to a deficiency in expertise. When a regulatory framework does not
foster competence that cannot be anchored to the Treaty on the Functioning of
the European Union (TFEU), it poses a problem for all market actors and
participants.
Currently, the EU finds itself in need of a
newer and more efficient regulatory framework. Yet, given that the EU
Commission’s primary focus appears to be on Ukraine (a state not meeting the
Copenhagen Criteria) and not on the EU Parliament’s proceedings, it is clear that
the present administration does not regard EU competence as a priority.
Moreover, with the President of the EU Parliament spending a considerable amount
of time in Ukraine, it amplifies the notion that governing and operating within
the EU’s jurisdiction isn’t their main concern at the moment.
Looks like Canada’s Ontario Securities Commission extended the #myforexfunds‘ order to October 31st. pic.twitter.com/Q6y3ZMS0AS
— Money Bird (@ItsATweetyBird) September 11, 2023
Varied Regulatory Stance
In stark contrast to their European
counterparts, American authorities are taking this issue seriously, playing a
significant role in unfolding Deel’s recent regulatory troubles. Meanwhile, the
Europeans seem to be on a protracted vacation, congregating in the
conflict-ridden city of Kiev.
Interestingly, the UAE has emerged as a
regulatory beacon amidst the regulatory failures of My Forex Funds. The Dubai
Multi Commodity Centre’s (DMCC) new crypto regulatory framework for propriety
trading has demonstrated itself to be both accessible and enduring, presenting
a neat clear-cut licensing path that can be achieved swiftly.
Important Notice 📢
Yesterday we learned that, without prior notice or discussion, a provincial securities regulator in Canada and the commodities regulator in the United States issued orders preventing us from trading securities or accessing funds in our bank accounts.
Until… pic.twitter.com/dKpxmx5axT
— MyForexFunds (@MyForexFunds) September 1, 2023
The grey listing
endured by the UAE over the past two years appears to have spurred them to
enhance their regulatory practices, including in the free zones, resulting in
agile and robust regulatory frameworks. These improvements could serve as a
model for the EU as they initiate a new Ordinary Legislative Procedure (OLP) on
propriety trading.
Looking ahead, the EU should aim to address
cases like that of My Forex Fund with the efficacy exhibited by their Emirati
counterparts in the DMCC, facilitating streamlined and foolproof licensing
processes. Excessive regulation through MiFID will not foster real market
developments and is more likely to induce disruption and regulatory arbitrage
than anticipated.
Perhaps, instead of venturing into issues beyond the purview
of the TFEU, the EU could learn from the approaches of the Commodity Futures Trading Commission (CFTC) and Deel, or
better yet, the UAE, which has repeatedly shown over a span of two years that
no goal is unattainable or mountain too high to climb. It is crucial to adapt
to the current needs, favoring sound regulatory frameworks over congested,
stifling regulations.
