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'British Virgin Islands', Andrei Knight, the founder and Senior Currency Strategist at fxKnight.com, suggested. 'Panama, maybe. The problem with those jurisdictions, of course, is also the shady element. That's where the loosest regulations are. Your clients won't trust you if you're based there. And there's a good chance you might lose all your money if you're based there'.
Knight, who consults for UBS, Ascension Capital, and has been involved with a number of hedge funds, said that he is in favor of smart and effective regulations. 'I think London is a good compromise between regulation and respectability, and particularly in forex they are pretty much the center of the currency trading world', said Knight, whose company is incorporated in London. 'London still clears more volume in a day than New York does, for example. So at least for us it was a smart and sensible choice. It might not be for every company'.
Going forward, Knight said that he thinks that the industry's growth - and the areas that will experience that growth - depends on regulation. 'America could be the capital of financial world if they write smart regulations'. The thing to remember is that with financial firms, 'we really live in a global market now'.
'If you pass unfavorable regulation, people are gonna move and take their money and their business somewhere else', Knight warned. 'You gotta protect the consumer but at the same time you've got to be conscious of and competitive with the rest of the world'.
'I think Asia is making a tremendous push for it - not just as a place to invest, but a place to be based as a company', said Knight. 'Those will probably be the two places I would look at. Frankfurt was traditionally a financial center, but obviously their fate depends a lot on the fate of the euro. Switzerland is another one that was traditionally a stronghold of financial business, but here again, they did some stupid decisions from a legal and regulatory standpoint and a lot of investor confidence in Switzerland is shaken now'.
Entrepreneurs who are looking for a niche should look no further than San Francisco. But for Knight, it doesn't really matter where his firm is located. 'It was never a question of, 'Should we incorporate in Los Angeles ?' where I am based, or Nevada because they have cheaper state taxes, or New York because it's the financial capital, because all three still follow the exact same rules', Knight explained. 'The United States isn't like Canada. In Canada, each province has its own regulatory structure and different rules, so it really matters if you're in Vancouver versus Toronto. In the U.S., I don't think it really matters that much. In the age of the Internet, I (can) live in California; I don't have to be in New York. I still get real-time price quotes from New York'.