Regulations of investment platforms and democratization of trading

FinanceFeeds Editorial Team

How can brokers and regulators prepare for changes caused by democratization of trading?

In the previous article, we discussed the future of money management systems and emerging industry trends such as simplification and gamification, which entice new clients to start trading by operating money management platforms with user-friendly web interfaces. Complementing with the growing diversity of financial offers, this trend leads to market acceleration, and these processes cannot avoid counteraction.

The subsequent reaction to the above-described trends is the proposal to create new legislation that will conduct all unbalanced processes in the constantly changing environment and protect newly joined traders. To reduce the arisen risks, regulatory authorities carefully monitor brokerages activities (even in social media). Such actions mostly involve securities with high volatility like ASIC restriction of trading rules for CFD symbols or FCA’s extension of the temporary regime for cryptocurrency trading.

Specifically for money management systems, this tendency appears as tightening the regulatory requirements for the approval of signal providers or brokers’ KYC policy. The growing interest in platforms such as PAMM or Social Trading among clients leads to increased responsibility of money managers for trading higher amounts of trusted funds. To make the investing environment more predictable, regulators ask brokers to check clients more carefully before allowing them to make financial decisions on behalf of investors.

To stabilize the trading activity of new traders with less experience, regulators have also introduced special categories of investors. Such frameworks already existed, for example, CySec client categorisation, or are widespread within the portfolio management industry. To run a PAMM account as a money manager, some brokers ask their clients to meet several requirements. For instance, traders need to prove their understanding of financial markets and deposit a substantial amount of their funds into a managed account to minimize potential recklessness. These steps are just a few preventive measures used by brokers to avoid additional pressure from the authorities while onboarding new clients.

Despite the aim to protect investors from unexpected losses, brokers cannot always take regulators’ position as advantageous. For instance, strengthening requirements to become a money manager can conflict with the attraction and retention of successful money managers or signal providers. In such situations, there are two general options for brokers. The first one is to adapt to the new obstacles with the trading platform configuration or to use money management solutions with in-built risk management functionality. The second option is to avoid the regulatory restrictions by moving to offshore zones, which have their own set of challenges.

The trends presented in the two materials are deeply independent processes that have their causes and possible consequences. But, even though all of them affect the development of money management systems, they are not the key dilemma for the system’s future.

Behind all these processes, there is one point that is common for the majority of brokers: the lack of differentiation of the investment offer. PAMM and Social Trading systems provided by different brokers are very similar to each other: it is either presented as an alternative way to invest or as a solution for traders with limited experience.

However, this strategy does not help brokers promote investment platforms and stand out from their competitors. To solve this issue, brokers cannot just prepare themselves to face the consequences such as market complications and legislation. Instead, by focusing on one of the trends, brokers may highlight money management systems in their service offer and achieve differentiation. Brokers should choose whether they want to build a business around gamification or simplification elements to attract a new generation of investors or create a sophisticated environment with advanced functionality for conservative traders.

In conclusion, both market acceleration and regulations are making their mark right now, affecting certain fields of the trading industry. In the near future, we can expect the market to significantly alter, so the main question we should be answering now is: “How can we adapt to these changes?”


Brokeree Solutions is a leading technology company specializing in turnkey solutions development, trading platform servicing, and consultation for retail brokers running MetaTrader 4 and 5. With a strong customer-centric approach, the company is renowned for its flagship, multi-server Social Trading, and PAMM investment platforms.

Read this next

Retail FX

Finalto sweetens offering for African traders with localized FX pairs

Finalto, the financial trading division of Gopher Investments, announced today that it has extended its offering with inclusion of a number of African Pairs to its trading platforms.

Digital Assets

BitMEX secures OAM registration to operate in Italy

Crypto exchange BitMEX has won regulatory approval from Italy’s financial regulators, allowing the exchange to continue serving Italian customers.

Institutional FX

FlexTrade integrates Glimpse’s post-trade bond execution data

“Looking further ahead, this integration also presents multiple opportunities for how fixed-income traders could leverage the trading data. For example, traders could tap Glimpse data as an input to AI-driven automation workflow strategies in the future.”

Industry News

FINRA fines UBS $2.5m for Reg SHO violations and supervisory failures

FINRA has fined UBS $2.5 million for Reg SHO violations and supervisory failures spanning a period of nine years.

Digital Assets

Bitfinex Pay launches feature that minimizes volatility risk

The currency conversion will take place every five minutes on any amount above $10.

Digital Assets

Mastercard launches Crypto Secure for risk assessment in digital asset space

“Crypto Secure will provide card issuers with a platform that allows them access to insights which will improve the safety of crypto purchases, increasing consumer confidence and creating the same trust they expect when paying with Mastercard.”

Retail FX

VT Markets wins 4 more awards including Best Forex Mobile App Global 2022

“Over the past few months, we have noticed a huge spike in downloads and daily active users on the VT Markets App. Our clients can trade multiple asset classes with ultra-low spreads, and access timely market news on our mobile app.”

Institutional FX

Blue Ocean ATS enhances price discovery and liquidity for after hours US stock trading

Liquidity and price discovery, missing from previous overnight trading solutions, are now possible utilizing the TNS network and managed service platform. Security of the private network and its access to all public clouds, uniformity of compliance and regulatory oversight, redundancy and recovery capabilities, plus the localized customer service around the world made TNS the best candidate for this major step in Blue Ocean Technologies’ growth.

Executive Moves, Retail FX

Equiti Group wins CySEC license to expand into Europe

“Regulation and good governance have always been and will continue to be a key part of Equiti’s business model.”