The first quarter of 2019 is almost finished and The Cyprus Securities and Exchange Commission (CySEC) is requesting trading volume of 2018 from all Cyprus Investment Firms (CIFs). The announcement was made on Tuesday, 21 March. According to it all of the retail brokers that are regulated by the Cyprus watchdog have to provide trading volume data in a new form.
The new forms require retail brokers to report their trading volumes for the entire year of 2018. In their report, CIFs must break down volumes into asset sub-classes and include all trading undertaken, including retail, as well as professional traders and eligible counterparties. In addition to that, the brokers must provide a report regarding margin trading and leverage amount. For example, if initial funds the trader used for a trade was $100, with leverage 1:100, the broker should report the total amount of $10,000.
The changes in the report form do not finish with this. The brokers should report two of the following trades separately – trades that were executed by the customers on their own account and trades that were executed by the broker on behalf of the client. This rule does not apply on market makers, they should only report their activity within the client trading section and leave the other section empty so that there will not be any double counting.
The reason behind the requirement is unknown
While the form of gathering the reports from the brokers is new, it is not the first time when the financial watchdog requested such information. Previously, the data gathered from CIFs was used to strengthen regulatory oversight. In its announcement, the CySEC did not clarify the reason behind requesting the trading volume data. It is possible that the financial authority wants the data to examine how the regulations brought in Europe by ESMA has affected the industry that plays a huge role in the economy of Cyprus.
The requirement might also be the starting point for new changes to the investor compensation fund the CySEC has introduced recently. The statement issued on the official website of the Cypriot financial authority states that there will be no reminder for the brokerages regarding providing the report. All brokerages need to provide a requested document by April 12th. According to the statement, brokers will not receive a reminder and those who fail to submit the report will face fines. The strict approach to the deadline is also a new policy of the regulator, according to the new rules in the investor compensation funds, the brokerages that meet the deadline while submitting the audited statements will receive discounts on the annual fees. On the other hand, brokers that will be unable to provide documents on time will have to pay an additional fee.