FX Solutions' Michael Cairns Explains Why Regulations are a Good Thing

When FX Solutions was founded in 2001, the company was very conservative in the way it approached the business.

"I don't think you can be overly compliant," Chief Executive Officer Michael Cairns told Benzinga. "We were very particular as to who we took as clients and what our criteria was for bringing someone on board -- a lot of background checks, etc. A lot of our competitors at the time took clients that we rejected. They may have benefited from it, they may not have. But our principles are our business; we adhere to regulations."

Cairns said that with regard to the retail forex market, the regulations in the U.S. have become, "extremely stringent over the past three years."

"We've had leverage capped to 50 to 1 (three years ago it was 400 to 1). You can't have ticket-based trading anymore," he added. "You can't have the offsetting of trades, hedging, keeping two trades open in opposite directions, things like that. There are a lot of restrictions imposed on the market. I have actually met with the board of the CFTC when they were bringing out these mandates. Among companies like FX Solutions, we are the only ones policing the industry from within."

"We have a lot of scrutiny on every single client," Cairns said. "Every single trade we're monitoring - we have [technology] in place to monitor trades."

He continued, "I think if you look at the amount of capital required to operate in the U.S., it's only the companies that are serious about this business and serious about their client-base that are still here."

Embracing Regulation

With so many new regulations being introduced to control the financial sector, many have complained that the government has taken things too far. Cairns has another viewpoint.

"You can look at it two ways: from an opportunity perspective, the reason why a lot of companies pulled out of the U.S. was because of the reduction in leverage," he said. "If you make your money through spread, then obviously the reduction in leverage will have an impact on your flow and thus your revenue."

"A lot of companies probably weigh the revenue side against what the capital requirements. To operate in the U.S., you're talking in the middle of $20 million, and that's just to be here. In total, you're probably talking about $30 million. So it's a lot of money to commit to your business."

Ultimately, Cairns said that he is in favor of regulation.

"FX Solutions has been very conservative and stringent with regard to regulations," he said. "Anything that makes the client more comfortable and gives him a sense of peace of mind that the people they're trading with are heavily regulated and their funds are safe [will give you] a long-term advantage in this business."

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