Christoforos Soutzis: Cyprus has undoubtedly become a leading hub for CFD brokers in the EU, especially since Brexit

Capital.com Executive Director Christoforos Soutzis delves into the ever-growing field of investment, explains the changes to regulatory frameworks that CIFs must deal with and notes the challenge of keeping up with the latest technologies.

Among other things, he says that following the UK’s departure from the European Union, many firms have sought to establish operations in Cyprus, benefiting from its stable regulatory environment and strategic location. Read on to find out why.

The EU’s recent regulatory blitz to protect retail investors has kept everyone on their toes. Which recent regulation has been the biggest help to the industry and which one made you feel like squeezing a stress ball?

One of the biggest advantages to the industry has been the passporting of investment firm licences within the EU. This mechanism allows firms to operate across multiple EU countries with a single licence, significantly reducing regulatory and administrative hurdles. It helps to materialise the EU’s conceptual goal of removing barriers between member states, promoting a more unified and accessible financial market for businesses and clients alike.

On the other side was the introduction of leverage restriction, which was uncharted territory for the industry. There was no clear indication of how the market would respond or how customers would react to these changes. It was a potential double-edged sword, with the risk of curbing excessive risk-taking while possibly stifling market activity or reducing trading volumes, which could have significantly impacted the market’s growth and dynamics.

With 253 CIFs now on CySEC’s books, Cyprus is looking like the EU’s CFD broker capital. How would you assess the local market’s growth and what more can be done to attract more firms to Cyprus?

Cyprus has undoubtedly become a leading hub for CFD brokers in the EU, especially since Brexit. Following the UK’s departure from the European Union, many firms have sought to establish operations in Cyprus, benefiting from its stable regulatory environment and strategic location. One key driver of the local market’s growth is the diversity of available financial products. In addition to CFDs, there is a rising interest in offering a broader range of investment products, which allows brokers to cater to diverse client needs and attract more institutional and retail investors.

Moreover, the regulatory framework in Cyprus has expanded beyond traditional financial products. The country now offers frameworks such as Alternative Investment Funds (AIF) and is actively developing frameworks for cryptocurrencies and digital assets. This makes Cyprus an attractive destination for firms looking to innovate and explore new financial instruments within a compliant environment. Another competitive advantage is the ease of acquiring talent. Cyprus is home to a well-educated and multilingual workforce, with a strong background in finance and technology, making it easier for firms to attract skilled professionals.

Additionally, the country’s ability to draw international talent adds to its appeal. Lastly, tax benefits for innovative firms, particularly those involved in technology and finance, serve as an additional incentive for companies to set up operations in Cyprus. These tax incentives encourage growth in the fintech sector, helping to solidify Cyprus’ position as the go-to hub for financial innovation within the EU. By continuing to expand these areas, Cyprus can further cement its status as the premier CFD broker hub and attract more financial firms seeking a favourable and progressive business environment.

Every industry has its roadblocks but what would you say are the biggest challenges ahead for the industry?

In today’s financial landscape, trading firms are increasingly technology-driven. The integration of advanced technologies lies at the core of their operations, making it essential for firms to adopt a tech-first approach to remain competitive.

Rapid advancements in technology, particularly in areas like artificial intelligence (AI), are reshaping the boundaries of the industry. These innovations are pushing firms to evolve constantly, and falling behind is simply not an option. In fact, we are seeing significant consolidation in the market, where firms that fail to adapt are being outpaced or absorbed by more agile competitors. At the same time, compliance costs are rising, both in terms of resources and financial burden. While this presents a challenge, we strongly support additional regulatory oversight. Robust regulations ultimately benefit customers, fostering trust and transparency in the market. Moreover, stricter compliance standards make it increasingly difficult for companies with questionable intentions to operate, contributing to a healthier industry overall.

Technological trends come and go but which upcoming tech do you think will truly be a game-changer for brokers and how?

AI is a transformative force for brokers, revolutionising several aspects of the industry. It enables brokers to provide a highly personalised experience to clients, tailoring services based on individual preferences and needs. AI excels at analysing client profiles, giving brokers deeper insights into customer behaviour, risk tolerance and investment patterns. Additionally, AI enhances security by detecting abnormalities and identifying potential fraud, ensuring a safer trading environment. Moreover, it provides advanced market analysis, offering valuable insights that can serve as a strong foundation for informed investment decisions.

This interview first appeared in the October edition of GOLD magazine. Click here to view it.