The broking market has continued to evolve fast since the financial crisis. The largest investment banks and traditional interdealer brokers now compete with an array of niche and specialist players. There are now a significant number of small to medium size firms in the broking sector, including:

  • Commodity brokers – in both established commodity markets such as energy, softs and metals, and emerging commodity markets, for example, biofuels – typically arranging deals in exchange-traded contracts
  • Fixed income brokers – operating on a matched principal basis, often specialising in less liquid issues or emerging market bonds
  • Mini IDBs – most commonly focused on exchange-traded equity derivatives, but also including fixed income, cash equity, and in some cases operating as an Organised Trading Facility (OTF)
  • International investment banks and brokers – particularly from Asia and Latin America, offering access to trading opportunities in their home markets.
  • Retail brokers – offering stockbroking, CFDs and Forex products to retail customers.

There doesn’t seem to be any let up in the pace of innovation. The rise of zero commission stockbroking has brought a number of new and innovative players into the market from the FinTech area, while the internationalisation of financial services in China looks set to bring an array of new competitors into the global broking market.

The regulatory landscape for broking firms

The regulatory environment faced by broking firms is tough, especially for the smaller players. Brokers are caught by the most onerous requirements introduced by MiFID II including best execution and transaction reporting. They also have to manage client monies and assets, and stand at the front line to detect and prevent market abuse. Many compliance teams in broking firms find the biggest challenge the breadth of the regulatory portfolio to be managed.

Meanwhile, the regulators continue to maintain pressure, with the FCA promising to take a tough stance in pursuit of “necessary and urgent” changes. Its ‘Dear CEO Letter’ of April 2019 details the regulator’s view of the “key harms” these firms pose to their clients and markets.

Regulators across all major jurisdictions continue to focus on brokers’ remuneration, conduct, culture, conflicts of interest management, market abuse surveillance systems, and financial crime controls. This increases the complexity of the challenge, as many brokers think globally, servicing clients in many jurisdictions.

How Bovill Newgate helps brokers

We understand that a one-size-fits-all approach doesn’t work when you have a broad range of regulatory challenges. We pride ourselves on treating every client individually, and providing practical and commercial advice across all areas of financial regulation.

  • Authorisation – we can help new brokers from concept to licensing from our offices in the UK, EU, US, Singapore and Hong Kong.
  • Global footprint – we assist established brokers in growing their global presence, by helping them to navigate the complex rules across different jurisdictions.
  • Compliance support – we partner with brokers to meet their local compliance obligations, through ongoing compliance advisory, implementation support, focussed compliance reviews, and short-term resourcing.
  • Market abuse – Brokers are at the front line of the fight against market abuse. We help them to develop market abuse risk assessments, establish effective controls, and calibrate and implement surveillance solutions.
  • Financial Crime – We will help you to meet your AML obligations and ensure that you have strong controls in place. We can do this by preparing key AML documentation including, AML risk assessments, frameworks, polices and procedures.