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.

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