Should Forex & CFD Affiliates Be Regulated?

The regulation of the  Forex  space around the world has been getting stronger over time. This is because the regulatory entities have reinforced their rules in order to combat crimes such as money laundering or the financing of terrorism.

However, the topic of affiliates and introducing brokers (IBs) has always remained a gray area where the laws do not fully govern it, at least in the vast majority of jurisdictions globally.

The market for Forex and CFD affiliates is a very large one and moves millions of dollars for brokers worldwide. The importance given to this niche is so great that many brokers have focused their marketing strategies on strengthening this front within their line of business, prioritizing them above others.

In this analysis, we talked to two experts in the field who will give us their thoughts on the question: should Forex and CFD  affiliates  be regulated?

Regulatory Scheme in Specific Regions

Giancarlo Lionti, Global Head of Affiliate Marketing at Skilling, believes that the environment should be regulated and provided the following reasons: “Considering the increasing number of requirements coming from the Financial Regulators and the limited control that a CFD Broker can have on its affiliates’ businesses, I would personally support the regulation of the Affiliate Business in Forex & CFD trading. It’s not rare that publishers and marketers don’t follow the indications provided by the regulated brokers they work with and, in my opinion, it is not fair that a Broker can get in regulatory and financial troubles for something that is not 100% under its control.”

He added that this would reduce the internal cost of time and resources required to run a compliant affiliate business and ‘protect both brokers and users from fraudulent affiliate activities.’

In the same line, Eduardo Delgado, Director at Fintexify, shares the vision of agreeing that affiliates should be regulated, but specifically in regions like the US and the European Union. “I think that a clear regulation for introducing brokers and affiliates makes their business more transparent and sustainable over time. Nowadays, unregulated introducing brokers and money managers face big challenges to carry out their activity. They are forced to go work with offshore entities which entails different forms of risks for them and their clients,” he said.

An ‘Affiliate License’?

Lionti also talked about the introduction of a hypothetic license for affiliates: “On the other hand, the introduction of an ‘Affiliate License’ would reduce the number of potential partners available on the market, who would then increase their Cost per Acquisition (CPA) expectations, decreasing the profitability of the Affiliate Business in the industry.”

Delgado shared his experience in terms of regulation in EU: “Based on my experience, in some EU countries, most IBs and MMs do not clearly understand the process to be compliant with their respective country’s regulations. Oftentimes the legal government officials themselves do not provide clear guidance. Precise and comprehensive guidance from regulatory authorities would help.”

EDITOR’S NOTE: This analysis is part of a series of Finance Magnates articles dissecting the latest trends in the online retail forex industries around the world. You can also read about developments in the retail forex scenes in Africa, the United Kingdom, North America, Australia, and Latin America by following the links.

The regulation of the  Forex  space around the world has been getting stronger over time. This is because the regulatory entities have reinforced their rules in order to combat crimes such as money laundering or the financing of terrorism.

However, the topic of affiliates and introducing brokers (IBs) has always remained a gray area where the laws do not fully govern it, at least in the vast majority of jurisdictions globally.

The market for Forex and CFD affiliates is a very large one and moves millions of dollars for brokers worldwide. The importance given to this niche is so great that many brokers have focused their marketing strategies on strengthening this front within their line of business, prioritizing them above others.

In this analysis, we talked to two experts in the field who will give us their thoughts on the question: should Forex and CFD  affiliates  be regulated?

Regulatory Scheme in Specific Regions

Giancarlo Lionti, Global Head of Affiliate Marketing at Skilling, believes that the environment should be regulated and provided the following reasons: “Considering the increasing number of requirements coming from the Financial Regulators and the limited control that a CFD Broker can have on its affiliates’ businesses, I would personally support the regulation of the Affiliate Business in Forex & CFD trading. It’s not rare that publishers and marketers don’t follow the indications provided by the regulated brokers they work with and, in my opinion, it is not fair that a Broker can get in regulatory and financial troubles for something that is not 100% under its control.”

He added that this would reduce the internal cost of time and resources required to run a compliant affiliate business and ‘protect both brokers and users from fraudulent affiliate activities.’

In the same line, Eduardo Delgado, Director at Fintexify, shares the vision of agreeing that affiliates should be regulated, but specifically in regions like the US and the European Union. “I think that a clear regulation for introducing brokers and affiliates makes their business more transparent and sustainable over time. Nowadays, unregulated introducing brokers and money managers face big challenges to carry out their activity. They are forced to go work with offshore entities which entails different forms of risks for them and their clients,” he said.

An ‘Affiliate License’?

Lionti also talked about the introduction of a hypothetic license for affiliates: “On the other hand, the introduction of an ‘Affiliate License’ would reduce the number of potential partners available on the market, who would then increase their Cost per Acquisition (CPA) expectations, decreasing the profitability of the Affiliate Business in the industry.”

Delgado shared his experience in terms of regulation in EU: “Based on my experience, in some EU countries, most IBs and MMs do not clearly understand the process to be compliant with their respective country’s regulations. Oftentimes the legal government officials themselves do not provide clear guidance. Precise and comprehensive guidance from regulatory authorities would help.”

EDITOR’S NOTE: This analysis is part of a series of Finance Magnates articles dissecting the latest trends in the online retail forex industries around the world. You can also read about developments in the retail forex scenes in Africa, the United Kingdom, North America, Australia, and Latin America by following the links.

Source: https://www.financemagnates.com/forex/analysis/should-forex-cfd-affiliates-be-regulated/