Listen to the Article: An Alternative Gateway to EU: What You Need to Know About Bulgarian FSC License

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Forex brokers know the EU's Markets in Financial Instruments Directive (MiFID) pretty well, as it connects the regulatory authorities of all EU countries in one network. That's why any forex broker who wants to enter the EU market would love to get a license from a MiFID regulator, and the most popular one is the CySEC license from Cyprus. But today we are going to talk about the forex license from the Financial Supervision Commission (FSC) of Bulgaria, an overlooked Southeast European country.

MiFID: The Gold Standard of EU Regulators

The EU is a huge economy, with a population of over 400 million and a highly integrated financial market. The EU Markets in Financial Instruments Directive, or MiFID for short, is what ties the regulatory authorities of all EU member states together.

The European Commission updated MiFID in 2011 and hence the MiFID II as we know it, which covers more trading venues and involves all instruments. It also includes updates on various aspects such as the provision of investment services, the scope of exemptions, the organizational regulations of trading venues, the authorization and obligations of data service providers, the sanctioning powers of competent regulators, the establishment of branches of third-country companies, and so on.

Any company that provides financial services in the EU must follow theregulatory standards and can freely operate in all member states, which is known as the "Passport". That means, as long as a broker gets a license from an EU country, it has a pass for the EU market.

For example, a Cyprus-regulated broker can serve UK clients without needing a UK FCA license. This is also part of the reason why some big-names choose to set up subsidiaries in Europe, as it allows them to grow business in the enormous economy with over 400 million people.

How Many Gateways to EU for Non-Big-Name Brokers Are There?

However, not all EU member states share the same regulation, and different countries have different requirements and costs. And when choosing a jurisdiction, one needs to consider various factors such as the strictness, cost, reputation, and efficiency of regulation. Among these factors, cost is crucial, as it directly affects the profitability and competitiveness of brokers.

In the 27 EU member states, some have lower regulatory costs, such as Cyprus, Malta, Bulgaria, and so on. Fazzaco has been keeping an eye on the regulatory dynamics of CySEC of Cyprus at all times, so today we will take a look at Bulgaria, because the country not only has low costs, but it boasts some other advantages as well, making it another gateway for brokers to access the European market.

Facts About the Bulgarian FSC License You Need to Know

Bulgaria is located in Southeast Europe and is a member of the EU and NATO. The country's economy and political situation are stable, and its fiat currency is the Bulgarian Lev (BGN), which is pegged to euro, 1 euro = 1.95583 BGN. The Bulgarian financial market is regulated by the Bulgarian Financial Supervision Commission (FSC), which is an independent government body that reports directly to the Parliament. The main task of the watchdog is to maintain the stability and openness of the non-bank financial market, as well as to protect the consumers of financial services and financial products.

Bulgaria has two types of licenses applicable to forex, namely Standard and Full. The Standard license requires an initial capital of 250,000 BGN (about 125,000 euros), and brokers can hold client funds, but may not trade on their own, which is the so-called STP mode. The Full license requires an initial capital of 15 million BGN (about 7.3 million euros), and brokers can handle transactions on their own, which is the MM mode. Both types allow brokers to provide services throughout the EU market thanks to the passporting rule.

In addition to the low costs, Bulgaria has other advantages too, such as being gateways to both the EU as well as Central and Eastern Europe; the labor market is relatively highly educated but costs fewer; the tax system is simple and transparent, and the corporate tax rate is only 10%, which is one of the lowest in the EU. Bulgaria's dividend tax is 5%, value-added tax is 0%, and personal income tax is 10%; finally, the regulatory landscape is flexible and efficient, and the FSC's approval process is usually done within 3 to 7 months, and the staff and management have good communication and cooperation with brokers.

Final Thoughts

All in all, the Bulgarian FSC forex license is yet another important gateway for brokers to enter the European market. Under the framework of MiFID, it can not only let brokers enjoy the EU's unified market and regulation, but also help them save regulatory costs and tax burdens, and improve operational efficiency and competitiveness. Therefore, for those who are interested in developing business in Europe, Bulgaria is a choice that can't be overlooked.