Broker Seminar Oct ‘17
Agenda • Broker Solutions Manufacturer & Wholesaler of Investment Product • 100% Broker focused • • Broker FX A new FX and International Payments Platform • • MiFID II & the New Consumer Protection Code Changes & how to prepare for them • • Structured Investments Offering solutions that traditional funds can’t • • Closing Summary
Broker Solutions Manufacturer & Wholesaler of Investment Product • Small Team Niall Tinney, Niall Duggan and Lara Coyle • Maintaining the Link with • Merrion • Account Set Up • Settlement • MMPI • MiFID License • • Clear focus on three fundamental investor requirements Income • Growth • Capital Protection • • 100% Broker Focused
Launch Presentation September 2017
Our First FinTech Solution FX and International Payments Platform • Broker Solutions launches Broker FX First in a series of FinTech solutions we are developing for Brokers • Full launch in Q4 2017 • • Exclusive to Financial Brokers • Empowering your firm to: Facilitate your clients in making and receiving international payments • Facilitate your clients in buying and selling over 140 currencies • Enabling your firm to compete directly with the Banks • Enabling your firm to earn a new source of revenue from your client’s • FX and International Payment transactions • Delivered in partnership with Ebury An established FX and International Payments provider • Full range of international services and risk management from the • simplest to the most complex solutions
Foreign Exchange Jonathan Minshull-Beech
Ebury – Our Background • A fintech company – our goal is to eliminate boundaries when trading internationally • Formed in 2009 by Juan Lobato and Salvador Garcia • Started life as an exotic currencies specialist, buying African and Asian currencies on behalf of our clients • Have grown from an initial team of 3 people to a firm of over 400 employees in 9 offices around Europe. • This year, we are opening offices in Dubai, Canada and the USA.
Foreign Exchange – Basic terms Mid-market –in the middle of buy/ sell prices. • Spread – the difference between what the bank buys at, and the price • it sells to clients. The bank’s mark up. Forward contract – Fixing an agreed exchange rate for an agreed length • of time. The person taking out the contract undertakes to buy the specified amount of currency at the ned of the contract. Margin call – Forwards usually require a deposit. If the trade goes • offside, clients are asked for more money as security. This is called variation margin Liquidity- the volume of a particular currency trading. The more liquid • the currency the cheaper it can be bought and sold.
The Situation • Irish Independent study, 2011 – Irish banks charged a margin of 3-4% on foreign exchange transactions. In addition, AIB, Bank of Ireland, Ulster Bank charged commission on top. • Banks use foreign exchange as a cash cow to subsidise other banking activities i.e. Current accounts • Picture hasn’t changed much since 2011 – comparison done by Ebury 18/08/17, figures taken from AIB, Ulster Bank and Bank of Ireland’s websites. • AIB – 1.39%, Bank of Ireland – 2.54%, Ulster Bank – 2.21% • On a payment of €100,000 – the bank will take between €1,390 – €2,540
The Need • Clients need a more efficient, cheaper way to send money abroad. • In partnership with Broker FX, Ebury offer a cheaper, more competitive service for clients. • Depending on liquidity, we can offer exchange rates which are 30-50% cheaper than banking competitors. • We can offer more competitive deposit terms for forward contracts than banks. This can be reduced variation margin, or an initial 0% deposit contract. • Clients can use our smart currency platform to execute their own trades. The platform provides accounting and reporting assistance, generating statements automatically.
Opening an account • Three stage process: • 1) Client fills in a short online application form, and supply proof of address, identity • 2) Introducing broker fills in a Know Your Customer form, detailing the client’s profile and activities • 3) Ebury’s in house compliance team run our checks, and revert for more information if needed. • Total time: less than 15 minutes to fill out our forms, account can be open in 24 hours.
New Regulations Preparations for January 2018
Agenda • New Regulations coming into effect on 3 January 2018 1. PRIIPS and KID 2. MiFID II 3. Addendum to the Consumer Protection Code 2012 • How do these new Regulations affect my firm and what can I do to prepare for these changes? • How can Broker Solutions and other Product Providers assist with these changes and my preparation? • Questions and Answers
PRIIPs & KID Commission Delegated Regulation (EU) 2017/653 • Packaged Retail and Insurance Based Investment Products Originally scheduled for January 2017 but problems with Regulatory • Technical Standards (RTS). Now bundled with MiFID II in January 2018 Intention is to make it easier for retail investors to compare products • In doing so, increase consumer value and promote investor protection by • enhancing transparency Encourage investment firms to consider how their products will compare • to competitors when distilled down to uniform product description Requires a PRIIP manufacturer to prepare and produce a Key Information • Document (KID)
PRIIPs & KID • What products are PRIIPs? Investment products where the amount repayable is subject to • fluctuations due to exposure to the performance of one or more assets that are not purchased directly by the investor Examples: Structured Products, Non UCITs Funds, Hedge Funds, Unit • Linked Funds, With Profit Investments, ETFs etc. Not PRIIPs: Occupational Pensions, Non Life Insurance, Term Assurance, • UCITs and Direct Investments/Bank Deposits etc. • Key Information Document Prescribed format and content • Person advising on or selling the PRIIP must provide the KID to the client • before the investment is made
Key Information Document (KID) • What is it? 3 page document in a prescribed format that must be clear, accurate and • not misleading Product generic rather than investor specific • Provides retail investors with simple and comparable information on • each PRIIP Purpose is to improve the retail investor’s understanding of the nature, • risks, costs, potential gains and losses of a PRIIP and to help retail investors to compare the PRIIP to other products • Who produces it? The PRIIP Manufacturer • Must be clearly separate from marketing information and available on • manufacturer’s website
Key Information Document (KID) cont. • What is a Retail Investor? A retail investor is a retail client that is not a professional client under • MiFID or who is a customer for the purposes of the Insurance Mediation Directive 2002/92 • What must happen with the KID? Must be provided to the retail investor by the adviser/seller ”in good • time” before there is a binding agreement in respect of the product KID can be provided on paper or, where the context of the transaction • supports it, some other durable medium or via a website When selling PRIIPs face to face, paper should be the default option • Updated annual KID likely to be necessary •
MiFID II Article 3 of Directive 2014/65/EU • What firms are affected by MiFID II? All MiFID authorised firms and • All firms authorised under the Investment Intermediaries Act 1995 (IIA) • as a result of the Addendum to the Consumer Protection Code 2012 effective 3 January 2018
Addendum to the Consumer Protection Code 2012
Addendum to the Consumer Protection Code 2012
Addendum to the Consumer Protection Code 2012
MiFID II Article 3 of Directive 2014/65/EU • What are the broad changes? We have identified 9 initially that we believe will impact all Financial Brokers: 1. Change in what it means to be “independent” 2. When Advertising, a tightening of how Past Performance and Simulated Past Performance is used 3. Mandatory recording of telephone conversations 4. New Conflicts of Interest disclosure requirements 5. New Target Market Analysis and Product Information requirements 6. New execution of orders requirements 7. New information on costs and associated charges disclosure requirements 8. New periodic suitability assessment requirements 9. New remuneration of staff requirements
MiFID II Article 3 of Directive 2014/65/EU • What are the broad changes? We have identified 9 initially that we believe will impact all Financial Brokers: 1. Change in what it means to be “independent” 2. When Advertising, a tightening of how Past Performance and Simulated Past Performance is used 3. Mandatory recording of telephone conversations 4. New Conflicts of Interest disclosure requirements 5. New Target Market Analysis and Product Information requirements 6. New execution of orders requirements 7. New information on costs and associated charges disclosure requirements 8. New periodic suitability assessment requirements 9. New remuneration of staff requirements • Now lets look at 4 in detail
Addendum to the CPC 2012 1. What it means to be “independent”
Addendum to the CPC 2012 1. What it means to be “independent”
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