FNG Exclusive… It looks like Japan’s largest Retail FX broker is taking leave of its regulated business in the UK.
FNG has learned that GMO-Z.com Trade UK Ltd, the London arm of Japan’s GMO Click Securities (and ultimately of publicly traded parent company GMO Internet Inc. TYO:9449) has made an application to have its FCA license cancelled.
GMO-Z.com UK has held an FCA license since 2014. The company initially had plans to launch a UK-based Retail FX and CFDs operation targeting UK and EU traders using its Z.com retail brand, but late last decade that morphed into an institutional-focused business focused on B2B liquidity for FX and CFD products to Retail FX brokers, institutional traders and hedge funds.
However as that business became more crowded and competitive, GMO-Z.com UK and its management team led by General Manager Nick Cropper and Chief Strategy Officer Ramy Soliman (ex Integral, CitiFX, IG) decided to focus solely on agency spot FX liquidity services, utilizing the company’s strong network of robust liquidity provision from the interbank market. That business is not considered regulated activity in the UK and as such does not require an FCA license (as would rolling spot forex and CFDs, Swaps, or Options), and therefore GMO-Z.com decided that it didn’t need the extra cost, required capital, or regulatory burden of maintaining its FCA license.
The decision to relinquish its license has indeed freed up capital for the group, with GMO-Z.com UK reducing its paid-in capital base from £14 million in 2019 to £1.5 million today, moving out £12.5 million in capital to other GMO group entities.
While the company’s application to have its FCA license cancelled was made back in July, the cancellation request has not yet been made – just like getting an FCA license takes time, so too does relinquishing one, as the regulator reviews all aspects of the request.
Under its new model GMO-Z.com UK clients who use its agency spot FX liquidity services must have their own prime broker agreement in place, with GMO-Z.com UK not providing any margin. Its current clients include hedge funds, brokers, and small banks.