The Ultimate Guide to
The Irish Financial Market
Based in Dublin, Ireland the former Irish Stock Exchange (ISE) dates back to the 1790s and is the largest stock market in Ireland and. Now known as Euronext Dublin after the exchange merged with other European Union exchanges in Brussels, Paris, London and Lisbon in March of 2018, Euronext is today the 6th largest stock exchange group globally by market capitalization, according to the World Federation of Exchanges.
Older forex traders might recall Ireland using the Irish pound or punt (IEP) as its national currency, but that was replaced as of January 2002 with the European Union’s consolidated currency called the euro (EUR) that is now used throughout most of Europe.
As the second most popular reserve currency worldwide, the EUR amounts to approximately 19% of total central bank reserves in Q3 2018, according to the International Monetary Fund (IMF), with the euro even surpassing the U.S. dollar in terms of the value of notes and coins in circulation.
Financial regulation in Ireland for online forex and contract for difference (CFD) brokers falls under the auspices of The Central Bank of Ireland (CBI). The central bank acts as the main regulator for all financial firms in Ireland and sets regulatory policy that is now based on the EU’s Markets in Financial Instruments Regulations (MiFID).
In January 2019 the CBI notified the CFD market that it is considering putting in place protections for retail customers with respect to the sale of CFDs, as recommended by the European Securities and Markets Authority (ESMA) in May of 2018.
Trading in Ireland
When looking for an online broker to trade forex or CFDs with, make sure to choose a well-regulated broker that has a strong reputation with clients, since they should be suitable for entrusting a margin deposit with them.
Online brokers generally offer several trading accounts for traders, including:
- Forex Trading: Exchanging one currency for another forms the basis of forex trading. Exchange rates fluctuate as one currency rises or falls relative to another in particular currency pair. The popularity of forex trading has expanded greatly once online trading became possible. The forex market is the most liquid and largest financial market globally and had a daily turnover of $5.1 trillion/day in April 2016, according to data compiled by the BIS.
- CFD Trading: Making transactions in derivative financial instruments known as contracts for difference (CFDs) allows traders to speculate on the future of their underlying assets. Such assets can consist of a currency pair, commodity, stock, stock index or other financial instruments.
- Demo accounts: Funded with virtual money, these accounts can be used to practice trading, test a strategy or check out a broker’s services and platform. Find out more on opening demo accounts here.
- Islamic accounts: These are suitable for traders who wish to trade in an account that conforms to Sharia law. Find out more on trading with an Islamic account.
With respect to stocks, Euronext Dublin has established itself as an attractive listing venue for European companies due to Euronext offering the deepest liquidity source in Europe. The exchange also now benefits from Euronext’s federal model, single cross-country liquidity pool, single rule book, and state-of-the-art proprietary technology.
Euronext Dublin’s primary ISEQ benchmark indices range from a broad overall index to a narrow 20 stock index. Equities traded on the exchange via the ISE Xetra electronic trading system after its trading floor closed in 2000, with plans existing to switch to Euronext’s Optiq platform.
Opportunities of Trading in Ireland
Ireland was only ranked 23rd for the overall ease of doing business by the World Bank, but the country ranked 10th for starting a business and 15th for protecting minority investors. This indicates a relatively favourable environment for business start-ups and retail traders.
Furthermore, according to a special Irish government report, Ireland has a strong international financial services sector that has shown resilience even in challenging economic times. Ireland also benefits from offering a highly-skilled workforce, an innovative culture, a competitive tax environment and a client-centred business focus.
According to export.gov, Ireland has a very favourable geographical position as the “gateway to Europe” and an English speaking population that U.S. companies often cite as a key reason they chose to invest in Ireland.
Furthermore, given Ireland’s prudent regulatory environment under the EU’s MiFID and solid commitment to a low 12.5 percent tax rate, this suggests decent growth opportunities and a sound forum for investors.
Challenges for Trading in Ireland
The UK remains Ireland’s nearest and one of its largest trading partners, so its choice to leave the European Union in the Brexit referendum vote taken in June 2016 casts significant uncertainty. In particular, a hard Brexit without an EU trade deal would have the most severe negative impact.
Furthermore, as a consistent net exporter, Ireland’s economy can suffer from tariffs, trade wars or the failure of major trade agreements. When such shocks are announced, they can affect the Eurozone economy in general, as well as the EUR/USD exchange rate, and this can cause issues for forex traders seeking more orderly markets
Ireland was also part of the European sovereign debt crisis that began in late 2009 during which some Eurozone member states were unable to refinance or repay sovereign debt or bail out local banks without having external assistance. This crisis also affected Greece, Portugal, Spain, Cyprus and Italy.
When it comes to practical matters for new businesses planning on opening an office, like dealing with registering property and getting credit, Ireland only ranked 64th and 44th respectively on the World Bank’s list of countries, so those areas need some improvement and can present a challenge.
In another recent development that should reduce the availability of funds aimed at increasing business incentives in Ireland, Reuters reported in July 2018 that the Ireland Strategic Investment Fund (ISIF) will narrow its focus to government priority areas like housing and mitigating the Brexit impact. The ISIF was created in 2014 from the National Pensions Reserve Fund to support economic activity in the country.
Summary
Overall, many traders and businesses find Ireland a popular country to operate in due to its low corporate tax rate and diligent regulation under the Eurozone’s MiFID regulatory structure.
When searching for a broker to trade through in Ireland, people should check to see that they offer a suitable range of asset classes, a decent trading platform, strong regulation, and adequate financial security for a margin deposit.
