OTC derivatives marketing debacle: Poland, of all places, pre-empted all the regulators on new ruling proposals

Much wrangling has occurred with regard to the new rulings in many jurisdictions on how FX products can be marketed, however in Poland, a country with a very small FX industry, the regulator took this action back in May last year. We speak to one of Poland’s largest IBs and educational portal owners, and can speculate that Poland’s market may grow more than other European counterparts

Poland is not known for its participation in the OTC derivatives markets, and is indeed a fringe entity on the global stage.

With the exception of DOM Maklerski and XTB, there are very few contenders, and the entire industry does not speak of Poland in the same sentence as it does Cyprus, North America, Britain or Australia.

Interestingly, however, despite its diminutive FX industry, Poland is more prominent than Western mainland European nations, France, Germany, Italy and Spain having no domestic participation whatsoever, leaving British electronic trading giants IG Group and CMC Markets to serve those markets alongside Saxo Bank and FXCM, all of which of course are in a different league to the two Polish firms, but are intrinsically not native to the mainland European markets.

Ireneusz Pukin

This demonstrates that whilst most of mainland Europe is a technological and financial void, and bears as much resemblance to modern financial markets infrastructure as a Tesla Model S does to a horse and cart and is therefore reliant on British and American business acumen and modernity to satisfy its retail client base, Poland does it in-house.

Along with this is the regulatory authority, KNF, which is an acronym for the Polish moniker that translates into Polish Financial Supervision Authority, which has an understanding of the environment over which it presides to the point of being one of the very first of the European regulators to apply strict rulings on the means by which OTC derivatives companies can advertise their products in Poland.

Speaking today to Ireneusz Pukin, CEO & Founder at FX Invest Group, one of Poland’s largest introducing brokers and owner of one of the country’s largest educational portals Akademiaforex.com, FinanceFeeds was made aware that back in May 2016 the KNF began to rule on the means by which retail OTC derivatives products are provided, not only in terms of the marketing materials, but also that brokerages should not remunerate their staff on deposit values, client losses or on preventing withdrawal of funds.

Mr. Pukin explained “On May 24, 2016 Poland’s Financial Supervision Commission presented guidelines for the way that brokerages provide OTC derivatives to a retail client base, with the guidelines to be implemented by brokerages by the end of September 2016.”

“Our understanding i that the KNF wished to eliminate abuses perpetrated by certain brokerage firms which used aggressive and intrusive marketing, along with, interestingly, operational aspects that are an obvious conflict of interest, for example making the salaries of sales staff dependent on the sum of deposits made by customers and the sum of withdrawals” he said.

“Among the sixteen specific guidelines put forward by the KNF, the scope included the role of the investment companies within the organizational structure of the brokerage sector, as well as the means by which companies actually onboard customers and acquire new business, and a strict clampdown on how brokerage firms which offer managed portfolio services that include one or more financial instruments are provided” concluded Mr. Pukin.

The Australian Securities and Investments Commission (ASIC) was among the first non-bank financial markets regulators to take a good look at marketing and client acquisition practices in the FX industry, and as long ago as three years ago – a lifetime in terms of retail FX regulatory evolution – began closing down companies and winding up their businesses altogether for misleading marketing practices, and in some cases prosecuting their directors.

Britain’s FCA followed suit, and now CySec is implementing new rulings with regard to how products can be sold and marketed, however it is interesting that Poland, with such a small market size, went into this over six months ago in such detail.

Recently, specialist consultancies have been established in Poland in order to provide services to brokerages wishing to establish there, and with these new rulings, perhaps the financial markets sector for retail customers is developing in such a way that it may be a new ground for expansion of the retail FX business.

Read this next

Retail FX

Weekly Roundup: John Oliver rips into MetaTrader, Binance to pay $10 billion

Welcome to this week’s roundup, where we delve into the latest developments in the Forex, Fintech, and cryptocurrency markets. Stay ahead of the curve with our comprehensive overview of the week’s most impactful events and trends across these dynamic sectors.

Retail FX

Lark Funding reopens to US traders, MyFundedFX picks cTrader

Canada-based prop trading firm Lark Funding announced it will once again welcome clients from the United States.

Institutional FX

Cboe FX volume falls to lowest level since summer

Cboe’s institutional spot FX platform, known as Cboe Spot, today announced its trading volume for the month ending February 2024, which took a step back after a strong rebound in December.

Retail FX

ThinkMarkets secures lucrative DFSA license in Dubai

Melbourne-based broker ThinkMarkets has secured a license from the Dubai Financial Services Authority (DFSA) after it has already incorporated its new subsidiary in the Dubai International Financial Center (DIFC).

Digital Assets

New Horizen Lays Out Its Vision Of A Modular, Proof Verification Layer For Web3 Networks

Horizen is forging a new path for the future of blockchain with its New Horizen initiative, which is building a modular Proof Verification layer that’s dedicated to verifying cryptographic proofs for any settlement layer, beginning with Ethereum. 

Digital Assets

Karma3 Labs Raises a $4.5M Seed Round Led By Galaxy and IDEO CoLab to Build OpenRank, a Decentralized Reputation Protocol

Using OpenRank, developers and web3 companies can build consumer apps where people can discover, use, fund, read, or buy something on-chain without worrying about getting spammed or scammed.

Digital Assets

Worldcoin down as Elon Musk sues OpenAI CEO Sam Altman

Worldcoin’s (WLD) token dropped following news of a lawsuit against related company OpenAI. The lawsuit was filed by Elon Musk and accused OpenAI and CEO Sam Altman of breach of contract.

Institutional FX

Exegy’s Liquidity Lamp adds intraday data to outperform S&P 500 by 31.8%

Exegy has incorporated intraday signals into its AI-powered iceberg order detection tool, Liquidity Lamp. By adding intraday data to a baseline mean reversion strategy, Exegy’s model outperformed the baseline by 10.5% and the S&P 500 (SPY) by 31.8%, respectively in the out-of-sample testing.

Industry News

Think Elon Musk backed your crypto exchange? ASIC’s latest reveal may shock you

In an absolutely shocking turn of events that nobody could have possibly seen coming, the Australian Securities and Investments Commission (ASIC) has bravely stepped forward to reveal that, yes, those videos of Elon Musk passionately endorsing a cryptocurrency exchange are as fake as a three-dollar bill.