Are ESMA Regulations the Death of Brokerage Firms?

Enforcement of the new ESMA regulations has put a lot of pressure on the shoulders of CEOs and COOs of brokerage firms in recent years. Geared towards transparency, the new rules impose every EU-regulated foreign exchange or CFD investment company to disclose the percentage of their winning and losing clients, aiming to put an end to the massive wave of aggressive advertising that most of these companies would propel both online and offline. According to an investigation conducted by Finance Magnates in August 2018, which scrutinised 30 brokers, all of which have a stellar reputation in the financial space for their award-winning platforms, the number of clients losing money on trading is exponentially higher than that of successful ones. The win-loss report, however, does not reflect in any way the quality of the service provided by these brokerages.


According to the analysis, the highest percentage of winning clients does not exceed 36.3% and that number is backed by social or copy trading, which some of those companies offer their clients. This means that the remaining 70 to 80% of the clients are “in red”. In turn, these figures damage the reputation of brokers, be they straight-through-processing facilitators or any other kind of financial services providers, leading to an outrage of public opinion with an increasing number of investors pulling out. To avoid a negative outcome, governments and regulatory authorities have tightened their policies and released more restrictive regulations like MiFID II, which have shaken things up for a lot of financial institutions.


Boosting positive numbers with a versatile solution


Although investing in financial derivatives involves a high level of risk, the new ESMA regulations aim to reduce investors' risk by requiring that brokerages diversify their offering to educate their clients more and thus increase the percentage of successful traders. A versatile, all-in-one set of solutions like Tradesocio’s can help brokerages boost the number of their successfully trading clients by providing a fund management solution that boosts the lifetime value of their investors.


Boasting a network of more than 30 early adopters amongst reputed brokerage firms with a solid presence in Europe and overseas, such as JFD Brokers, Argus FX, Orbex, Scope Markets, to name a few, the Tradesocio platform is a SaaS, all-inclusive solution consisting of five dedicated components – Separately Managed Accounts (SMA), Mirror Trading, ETF Station, Robo-Advisor and TS Trading - designed to address the challenges that brokers, fund managers, and investors face with current implementations.


Unlike traditional investment platforms, which require an investor or a broker to manage multiple accounts for each and every fund allocation, Tradesocio’s solutions allow brokers, investors and fund managers to manage multiple allocations from one account while keeping track of their performance in real time. By giving access to a fund manager’s performance in real time, our platform opens a whole new land of opportunities for investors of all levels of expertise allowing them to make informed investment decisions.


Supporting the transparency pre-requisite laid down by the new ESMA regulations while at the same time serving brokers, investors, and asset management firms, our investment and portfolio management solutions are a must-have for financial institutions on the lookout for ways to thrive and remain compliant with ever-tighter legislation requirements.


Get in touch with us and find out how your brokerage can thrive while remaining compliant with new regulations.