Brexit is an extremely controversial topic. There are various ways we can look at it. The social impact, the political impact and of course the economic impact. There were hopes that the UK government would manage a "Soft Brexit" deal, but they seem to find it hard to find equal ground. So a question arises. If the UK government themselves cannot come to a conclusion to the crisis, will the EU even listen to their deal if they ever have one?

The looming of a Hard Brexit is something very hard to deal with for most UK-based companies. Some of the largest banks stationed there have already diverted massive amounts of resources outside of the country. Opting for the next best thing, Germany, or the neighboring Island of Ireland. It is only natural to see other financial firms to follow the footsteps of these institutions.

The mass migration

Forex brokers have already stated their discomfort with the tightening regulations on trading activities, not only within the UK but the EU in general. The ESMA regulations that pretty much restrict traders to trade with pennies, is not lucrative at all. Therefore an emerging and profitable market needed to be found.

There are several criteria to be filled in order to be eligible to host UK Forex brokers.

• The country needs to have a stable economy
• The political sphere needs to be without controversies
• The majority of the population needs to understand the English language

Based on these criteria, there are not too many places a fleeing Forex broker can go. In fact, there are exactly 3 countries worth paying attention to.

South Africa

South Africa is indeed considered as one of the best options here, but it's not perfect. One major problem is that political stability is not guaranteed. Sure, it has been looking up for the last couple of decades, but the socio-economic problems in the country are rampant. If you see SA forex brokers, they're quite low in number and that has its own reasons. Just getting permission to start operations is not that easy. Furthermore, the country has just established a tangible financial regulatory framework last year.

However, when it comes to economic growth, the willingness of the population to participate in the markets and the language barrier, South Africa emerges as a perfect candidate. According to reports, dozens of Forex brokers have already started applying for licenses. In addition to all of this, South Africa is still relatively close to the CET timezone, which is an advantage to the brokerages as they can still maintain their staff on the European Continent.

Australia

Australia comes in second place. It does indeed have quite a lucrative market, but the competition is quite large. The political, economic and social situation in Australia is far more reliable than anywhere else. However, the fact that it is a developed country, implies that there will be a bunch of costs connected to packing up and moving the whole company there.

Licenses by themselves cost hundreds of thousands of dollars and some brokers are not ready to make that commitment. Furthermore, the timezones are way off and the bulk of their customer base will be left with either low-quality support or no support at all.

Australia is also susceptible to being influenced by EU regulations. The systems are very similar, but not as restricting. But if the Aussies were to see benefits in a heavily regulated industry, the brokers would have to rinse and repeat their moving process.

New Zealand

New Zealand is a good choice for a very small brokerage. It wouldn't cost them too much to move and the operational costs will be on the low end as well. However, the largest problem with New Zealand is its market size. There are about 4.8 million people living there and the percentage of people interested in Forex trading is bound to be on the low end. For a large firm that is most common in the UK, this country is just not worth it.

The Nomad life?

After these listings, it does indeed look quite dire for the brokerages. They may remain in the UK and risk huge losses because of damage to the GBP. But that is also out of the question, as the FCA has already stated that it agrees with ESMA regulations fully. Even if the UK were to leave with a Hard Brexit, the regulations would still remain.

Packing up and going to an offshore country, carries risk as well. Most importantly, it carries risk to the brand of the brokerage. For example, stating that you are based in Seychelles or Belize is not the best thing you can do as a sophisticated Forex brokerage with years of experience.

At this point, it is most likely that brokers will take the risks and go for either South Africa or Australia. But the decisive actions are yet to be taken.