UK financial regulator FCA and pan-European regulator ESMA issued coordinated statements today, confirming that they plan to “stick to their guns” once the UK-EU Brexit transition period ends on December 31, 2020.
Brexit was officially enacted as of January 31, 2020, with an 11-month transition period put in place to allow financial institutions, corporation, and individuals to have enough time to prepare for a post-Brexit world.
What that means for Retail FX brokers is that UK-EU license passporting will end, pending a shift in policy on both sides, as of the end of this year. Brokers holding an FCA license in the UK will not be allowed to onboard clients from the EU, and brokers with an EU country license (such as a CIF license from CySEC in Cyprus) will noe automatically be allowed to open an office in the UK and take UK based retail clients.
A number of Retail FX brokers which hold one of the two aforementioned licenses are currently scrambling to acquire the other before the transition period ends. For example, we reported earlier this week that FXOpen (which has an FCA licensed UK subsidiary) had acquired Cyprus based AMB Prime, for precisely this reason.
The statement issued today by the FCA (which is similar in scope to that put out by ESMA) reads as follows:
FCA confirms MoUs with ESMA and EU securities regulators
On 1 February 2019, we announced the agreement of Memoranda of Understanding (MoUs) with the European Securities and Markets Authority (ESMA) and EU regulators covering cooperation and exchange of information in the event the UK left the EU without a withdrawal agreement.
The UK has since left the EU with the Withdrawal Agreement in place on 31 January and the UK entered into a transition period. As EU law continues to apply in the transition period, these MoUs were not required to take effect.
The FCA, ESMA, and EU national securities regulators, confirm that these MoUs remain relevant and appropriate to ensure continued good cooperation and exchange of information. The MoUs will come into effect at the end of the transition period, which is set to expire on 31 December 2020.
Firms should refer to our Brexit pages and consult further specific sectoral information, which we will continue to keep under review.