Haydn Franklin Haydn Franklin, Wednesday 4th March 2020, 9:25 AM CET
fx global hub

FX Market Growth is one of the essential terms for the forex industry, with multiple nations competing to maintain the most prominent market percentage. Australia holds that title, with seventeen percent of the total translational worldwide volumes supported through their forex services. It’s estimated that more than sixty licensed firms are operating under the Australians Securities & Investments Commission, with more than one million clients trading through these firms. Subsequently, there’s more than $22 trillion earned through gross annual turnovers. This is extended to $675 million in yearly transaction fees.

Financial analysts explain that this substantial period of FX Market growth is after the regulatory arbitrage of Australia. This is about to change with significant regulation overhauls coming from ASIC, which will be similar to the product intervention measures implemented by the ESMA two years ago. There’s additional regulation coming in the form of product advertisement and design, forcing oversea clients and nationalist brokers to re-evaluate how they approach this market.

This suite of regulatory changes has followed after twelve prior months of alterations as well. Those substantial alterations primarily resulted around advertising, with brokers unable to showcase their products through television or radio broadcasters. The new eight conditions that have been proposed are listed down below. If they’re placed into effect, the chances are that trading activity in Australia will drop by a factor of 10%. Those proposed conditions include:

  • Required Margin-Close Out Insurance at 50%.
  • Unlimited Negative Balance Protection required.
  • Prohibitions of Rebates, Trading Credits and Unregistered Currencies.
  • Yearly Risk Warning Disclosures on direct client losses.
  • Overnight Funding Disclosures with real-time data surges.
  • Listed Rate of Interest & Estimated Cost for retail clients.
  • Total Position Size Disclosures with Real-Time Data.
  • Leverage Restrictions at 30:1.

Another element of the upcoming regulations that have brokerages is concerned is the “Onboarding Legislation”. The updated rendition of this legislation isn’t allowing for brokers to onboard clients from outside the Australia Jurisdiction; it’ll now be deemed illegal and be considered a breach of the commercial license contract. Considering that 83% of active volumes are earned from clientele located outside Australia, this announced legislation will create an existential crisis for brokerages. They’ve begun to search for legal opinions on this section of the forex legislation.

Local markets will be impacted by a minimum of 14% and seen an immediate drop in OTC Derivative Issuers in Australia. The OTC sector in the Australia Forex Industry was slated to be one of the most popular markets this fiscal year. ASIC has guaranteed that it won’t be possible going forward. This isn’t the only thing the governing entity has done to limit the FX Market growth of the market. They’ll be implementing a new distribution regime starting April 5th, making it drastically harder for new currencies to enter this landscape. It’s created a substantial backdraft of sold-to-unreceived forex blockchains and cryptocurrencies.

Australia’s Market Remaining Strong

There is still positive news waiting for traders and investors with the Australia Forex Market. It’ll always remain as a substantial presence in the CFD and FX industries, with their consumer protections to capital requirements being some of the best worldwide. This extends to their segregation of funds, which enables for simplified dispute solutions amongst brokers. All solutions become backed by the Australia banking system, with some of the most notable exchanges include FP Markets and Pepper-Stone Brokers. They’ve created incredible products that are maintained globally. The challenge with the new regulation is that startup brokers won’t have easy access into Australia, with the previously legalized operators remaining prevalent in this space.

Sao Paulo, Trading Performance product intervention measures

These regulation alterations will add a level of business orientation into Australia. Various technologies firms will be required to enter the Australian Forex Market to assist with execution tools. These tools allow for third-party verification, which will supersede the proposed changes from ASIC. However, it’s suspected that over a prolonged period, these brokers will move from the forex industry over to the technology space. It’ll enable them to avoid countless regulation hurdles.

The Geopolitical Climate

There have been numerous alterations in the geopolitical forex space, with Australia remaining one of the title contenders for the “FX Global Hub”. This follows after Hong Kong lost that title. The Hong Kong People have continuously rioted for democracy, destroying their financial hub in the process. Then there was London who could’ve become the global hub for forex trading, which quickly dwindled after Brexit was confirmed and completed. Countless financial analysts expected this burden to fall onto Frankfurt afterwards, with the German-city showing no signs of wanting to lead the global forex industry. This leaves America and Australia remaining, with many financial analysts expecting that Australia will take this title.

Australia needs to implement more convoluted regulations if they want to become the FX Global Hub. It’d prove to be beneficial for their yearly economy, bringing potentially billions into a nation that struggles with climate change daily. The Australian Securities and Investments Commission doesn’t believe that the proposed profits are realistic, that this form of trading will be detrimental for Aussie’s. It’s the fact that this is an unconventional way of trading that’s been growing in popularity over the last ten years. All governing financial entities have been resistant to improve with the modern era, preferring their outdated form of financial trading.

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Haydn Franklin

Author: Haydn Franklin

Hayden joined whichbroker.com in March 2019. He previously held positions at leading US facing financial news outlets. Hayden's focus is primarily Crypto and Forex news at whichbroker.com, however he is also whicbrokers long form content specialist leading him to write longer posts with an investigative angle. Hayden gradutated from the University of Chicago. Haydn Franklin can be contacted at [email protected], View all posts by Haydn Franklin

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