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FCA to change license requirements for STP forex brokers – media

Mar 07 2018
By
Jonathan Smith

UK’s Financial Conduct Authority (FCA) is looking into forcing the straight-through processing (STP) forex brokers to upgrade their licenses to those for full market makers, reports Finance Magnates.


Quoting sources from the industry, the site claims FCA has sent a letter to a number of its charges to inform them of prospective changes to the regulatory environment. According to the document, the watchdog is planning to force the STP brokers to upgrade their licenses in order to ensure better negative balance protection from losses of their clients in case of extreme market volatility.


The main changes would be in regard to the capital requirements for the brokers and they would most likely be raised in order to be able to cover a large negative balance. Currently there are different capital requirements for the FCA-regulated brokers, depending on their trading volume and number of clients, but not less than GBP 1 million.


An STP broker is the broker, which upon receiving a client order, passes it on directly to the liquidity provider, without any intervention from a Dealing Desk. This makes the processing of orders faster and clients can trade during the release times of financial news without any restrictions. However, it can also be risky, as the broker cannot intervene in times of high volatility and black swan events.


Such brokers holding an FCA license are FXCM UK, FxPro, XM, XTB, FxOpen, ThinkMarkets, to name a few.


TAGS: fca  uk  stp  capital requirements  license 
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