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Regulatory Challenges- Recent Deel & My Forex Funds Scandal!

My Forex Funds Deel Regulatory Challenges

There has been news that has sent shockwaves through the Proprietary world. The scandal involving HR startup Deel and My Forex Funds has once again shone a spotlight on regulatory challenges. This time, however, the blame may not entirely rest with regulators. My Forex Funds’ involvement in unregulated proprietary trading, inadvertently ensnaring Deel, has the potential to inflict more significant damage on the latter.

The regulation of proprietary trading has always been a complex and demanding task. Within the European Union, this type of trading was partially governed by the Markets in Financial Instruments Directive (MiFID). However, introducing the Investment Firms Directive (IFD) was designed to create a more lenient regulatory framework for proprietary trading. This is aimed at reducing market burdens rather than creating liquidity problems for trading institutions compared to banks.

Unfortunately, since its inception, the regulation of proprietary trading has suffered from inadequate oversight due to a lack of expertise. When a regulatory framework lacks the competence firmly anchored in the Treaty on the Functioning of the European Union (TFEU), it poses significant challenges for all market participants.

My Forex Funds & Deel- Regulatory Challenges 

The European Union finds itself in dire need of a more efficient regulatory framework. Yet, it appears that the EU Commission’s primary focus lies elsewhere. Notably on Ukraine (a state that doesn’t meet the Copenhagen Criteria), rather than on the proceedings of the EU Parliament. This raises questions about the current administration’s priorities when it comes to EU competence.

Furthermore, with the President of the EU Parliament dedicating significant time to Ukraine, it amplifies the perception that governing and operating within the EU’s jurisdiction isn’t their foremost concern at the moment.

In stark contrast to their European counterparts, American authorities are taking the Deel and My Forex Funds issue seriously. They are actively involved in addressing the regulatory challenges. Meanwhile, the Europeans appear to be on an extended break, congregating in the conflict-ridden city of Kiev.

An unexpected beacon of regulatory efficiency has emerged amidst the regulatory failures of My Forex Funds – the United Arab Emirates (UAE). The Dubai Multi Commodity Centre (DMCC) has introduced a new crypto regulatory framework for proprietary trading that has proven both accessible and enduring. This presents a clear and streamlined licensing path that can be swiftly achieved.

The UAE, which endured a period of greylisting over the past two years, has used this experience to enhance its regulatory practices. This was used even in free zones. These improvements could serve as a model for the EU. They embarked on a new Ordinary Legislative Procedure (OLP) related to proprietary trading.

What can we Expect?

Looking ahead, the European Union should strive to address cases like that of My Forex Funds with the same efficacy demonstrated by their Emirati counterparts in the DMCC. Excessive regulation through MiFID is unlikely to foster genuine market developments and may lead to disruption and regulatory arbitrage.

Perhaps, instead of venturing into issues beyond the purview of the TFEU, the EU could draw inspiration from the approaches of the Commodity Futures Trading Commission (CFTC) and Deel, or better yet, the UAE, which has shown over two years that no goal is unattainable or mountain too high to climb. Adapting to current needs by favoring sound regulatory frameworks over cumbersome regulations is crucial. This will help to maintain a healthy and dynamic financial environment.

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