“A number of experts may say that the US might be the first to introduce prop trading regulations, but it might be the UK as well,” Remonda Kirketerp-Møller, founder and CEO of Muinmos, told Finance Magnates while speaking on the sidelines of iFX EXPO International in Cyprus.
“There are definitely prop trading firms operating out of its jurisdictions. Some of them are legitimate, but unfortunately, some are currently bypassing regulations and operating under a separate non-regulatory umbrella”, she added.
“[Regulations] Will Remove Players that Should Not Really Be in the Space”
Pointing out the necessity of regulating the prop trading industry, she highlighted the issues with payout denials by many prop trading platforms. She added that “there is no doubt that regulators have started to see these issues” and such situations result in “new regulatory frameworks.”
“The regulators in the UK are very fast in tracking these types of issues,” she said. “It's obvious from some investigations that are taking place. We receive opinions from different market participants, such as whether you feel it is coming from an audit or if it is coming really from the market. We have a feeling, at least seeing the framework of how the UK, for example, FCA, has been operating.”
About a month ago, Finance Magnates reported that the European Securities and Markets Authority (ESMA) ran an initial check on prop trading firms and also discussed possible regulations in the industry. Further, the Czech National Bank also commented that some prop firms “may be subject to MiFID.”
“Hopefully, it will remove players that should not really be in the space,” Kirketerp-Møller said on the expected regulations on prop trading firms. “But, it will also put some companies out of business. And that's, of course, the negative impact.”
“I don’t think necessarily regulation has to immediately go out that may hinder the smaller firms,” she continued. “It could just start with the basics of regulation. It’s just putting some order into the industry before the regulators extend it into something more of a full brokerage house's needs.”
“MiCA Is Going to Ignite More Excitement”
While the regulators have yet to hit the prop trading industry, new rules have already been implemented for the cryptocurrency industry: Markets in Crypto-Assets Regulation (MiCA). At the iFX EXPO International, Kirketerp-Møller also moderated a panel that discussed the significant regulatory transformations that have reshaped the landscape of compliance and operational practices.
“MiCA is going to ignite more excitement,” stated Kirketerp-Møller, adding that, “a lot of people say are we going to see more crypto businesses closing down, but I think there will be many more crypto providers opening up and creating much more competition in the market, which is a good thing.”
As a part of MiCA, the rules for issuing and distributing stablecoins have been effective since the beginning of this month. The complete framework, which includes reporting and mandatory KYC checks for crypto transactions, will come into effect at the end of 2024.
“Any regulatory framework like MiCA puts order in the market,” she continued, “and any order with regulation is going to increase the energy for companies, who can invest their energies into operating the businesses because they’re not afraid of what’s coming next. There’s already a framework to operate on.”
Apart from MiCA, there is also the Digital Operational Resilience Act (DORA), an EU regulation that entered into force on 16 January 2023 and will apply as of 17 January 2025.
“Right now, a lot of talk is going on around DORA and how that's going to impact the industry,” Kirketerp-Møller noted. “We try to look at it as if it should rectify what's to be regulated… We don't know to what extent that will impact the service providers, but it will bring more order and compliance solutions.”
