The consequences of the end of the Brexit transition period for the FX industry are gradually becoming clearer. Alpha FX Group PLC (LON:AFX), a provider of FX risk management and alternative banking solutions to corporates and institutions internationally, today provided a trading update, offering details into how it is doing amid the latest Brexit-related developments.
The Group says it has been preparing for a no-deal Brexit for a considerable length of time and is therefore able to continue servicing the vast majority of its European clients. However, the limited scope covering financial services within the Free Trade Agreement means that Alpha FX will now be concluding the final set up of a wholly-owned subsidiary established in Malta, with completion expected by the end of the first quarter at the latest.
Until this time, the business will service European derivative clients through reverse solicitation and operating on an execution only basis.
Alpha FX stated:
“Due to reverse solicitation not being uniformly implemented across EU Member States, the Group will not be servicing derivative clients in certain EU Member States and so a small number of existing clients representing less than 1% of the Group’s revenue will not be able to place new derivative trades with us until Malta is operational”.
Reverse solicitation means the Group can only offer its European clients derivative services when they request them. However, Alpha FX says it is confident the revenue impact will be minimal during the short period that it is concluding the setup of European base.
The vast majority of preparations were complete prior to 2021, with an in-principle no objection letter obtained from the Maltese financial services regulator, Alpha FX explains. It adds that it chose not to initiate the final setup until a Brexit outcome was confirmed, conscious that requirements were vulnerable to change, and that the process could even have proven unnecessary.
In terms of performance, Alpha FX says that, following the last trading update on 3 December 2020, trading has continued to be strong. The Group expects revenue for the full year to be approximately £46 million and underlying operating profit slightly ahead of most recent expectations.
Growth for the year was generated from the Group’s FX risk management and alternative banking divisions, despite the former seeing a significant impact in the first half from businesses delaying their trading activity because of the slowdown in global trade as a result of COVID-19. Despite the backdrop, client numbers increased by 16% during the year from 648 to 754.