Belgium’s FSMA Cautions against Trading Software Firms

Belgium’s financial market regulator, the Financial Services and Markets Authority (FSMA), issued a warning against Finiko, a company offering Expert Advisors, and also cautioned against the industry of such trading software as a whole on Tuesday.

Expert Advisors, or popularly known as EAs, are scripts and software that are used to automate the trading of the Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term, CFDs and other derivatives. These trading parameters are pre-programmed, and rookie traders only need to run them on trading terminals to initiate trading with minimum or no manual intervention.

The regulatory warning came as Belgium prohibits the retail sale and distribution of the over-the-counter forex instruments, CFDs and crypto derivatives. It is one of the very few modern economies that has imposed such a ban.

“These [trading software] companies do not have [the] authorization to offer financial services and products in Belgium,” the FSMA stated.

Pyramid Schemes

According to the Belgian watchdog, these trading software companies operate in a pyramid structure and incentivize users to introduce new members. “In Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term, they receive compensation in the form of a commission or discount on the price of the software package,” it added.

Additionally, the regulatory warning elaborated that these trading software businesses usually target young and inexperienced traders promising a luxurious lifestyle.

“The message is that everyone can afford a luxurious lifestyle provided they bring in enough new members and make the appropriate investment in the software being promoted,” the FSMA added.

The Belgian regulator always remained vigilant against financial frauds and unregulated financial markets. In September last year, the regulator reiterated its warning against the selling and trading of the banned leveraged financial products.

Moreover, it maintains a list of flagged platforms that include the names of derivatives platforms, crypto exchanges, boiler room scams and many more. Furthermore, last year the regulator raised alarms against the rising number of recovery room scams in the country.