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Monday, 22nd April 2024
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Irish firms gear up for European expansion Back  
The introduction of the Markets in Financial Instruments Directive (MiFID) on November 1st will present Irish spread-betting firms with a massive opportunity to significantly grow their businesses.
Irish spread-betting/contracts for difference (CFD) firms are currently eying up new markets into which they can passport their services under new European regulation. With CFDs only available to retail investors in Ireland, the UK, Australia and South Africa, Irish firms will have a huge advantage in targeting the European market.

As of November 1st this year, when the Market in Financial Instruments Directive (MiFID) comes into play, spread-betting firms will find it much easier to expand across Europe. They will also come under the supervision of the Financial Regulator for the first time. In the UK, spread betting firms are already monitored by the Financial Services Authority (FSA), but in Ireland spread-betting firms currently operate under bookmakers’ licences.

Under MiFID, spread-betting firms will be able to operate all over the EU and will be able to advertise for the first time throughout the EU, pro-actively seeking clients in other European countries. As spread betting firms are predominantly internet based, this means expansion could come at a low cost as the establishment of branches are largely unnecessary.

Conor Foley, CEO with Worldspreads, told FINANCE that Worldspreads’ recent listing on London’s Alternative Investment Market, in which it raised €8.6 million (?5.77 million) was driven by the passporting opportunities offered by MiFID.

The firm already operates in Greece, Hungary, Spain and Germany, but had to go through a lengthy regulatory process in order to do so. Under MiFID, this won’t be necessary, and the firm plans on using the funds raised in the AIM listing to drive expansion in five/six other European countries, including those in Scandinavia and France. The flotation will also heighten the firm’s profile, says Foley, enabling it to attract new clients and joint venture arrangements. While AIM was chosen due to the UK fund management’s industry familiarity with spread-betting, Foley doesn’t rule out a similar listing on the Irish Stock Exchange’s IEX market.

Another Irish firm looking to expansion is Delta Index. According to Conor O’Neill, joint managing director of Delta Index, the firm has been gearing itself up for growth over the past 10 months, and is planning to ‘passport’ into Germany, Italy and Sweden. He says that initially the firm will aim to sell as much as possible out of Dublin, rather than going down the route of opening branches in each country.

O’Neill is very upbeat about the opportunities for his firm under MiFID, and also believes that regulation of the sector, will further legitimise it in the eyes of the public.

However, it’s not all positive. One of the most contentious aspects of the new regime has been the issue of ‘best execution’, which dictates that financial services providers give customers the best possible outcome from financial dealings. While there has yet to be an official announcement on this, Foley says that he is convinced that it won’t apply. He says that it is ‘illogical’ to apply ‘best execution’ to spread-betting, as he says that it takes place anyway, in that clients are quoted a two-way price. Delta Index’s O’Neill is also confident that spread-betting firms will be excluded.

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