Australian forex volumes are skyrocketing

As European brokerage bankruptcies continue, Australian companies are doing great.

If you're wondering how much the market is responding to the increasing number of regulations, some key data might help. The sector's migration and that of many clients to Australia has continued since the tightening of Europe's laws.

Listed companies such as CMC Markets and IG Group have issued profit warnings or published disappointing figures. The low volatility across the spectrum is pushing even more European brokerages to the edge.

Australia has become a magnet for forex brokerages over the past few years, as they have anticipated radical changes to their economic models due to ESMA activities last summer.

Visualisation of the boom of Australian brokerages

In recent months, a certain amount of clients have migrated to Australia. A sample from some of the regional strongholds shows that changes in the regulatory landscape have a significant impact on traders' appetite. More than 12 months have passed since the first reports regarding the opening of EU trading accounts with Australian brokerages.

Traders that still have an appetite for risk have found a way to get what they need: leverage in a secure and regulated environment.

While worldwide forex trading volumes by retail traders climbed to $5.4 trillion by April last year, this figure dropped to just $4.5 trillion in the third quarter, rebounding only a bit toward the end of the April 2019. In the meantime, Australia's top brokers AxiTrader, ICMarkets and Pepperstone have seen a steady increase in trading volumes throughout last year.

As shown in the above chart, the total market share of the major Australian brokers in the worldwide trading market for individuals which stood at 12% at the beginning of the year jumped up to 17% by the end of 2018.

Customer flow

Australian brokers aren't just benefiting from the fact that Europe's traders are deciding to take their business to more leverage-friendly countries. They have also attracted a worldwide audience. 

While the FCA has always been a preferred spot for traders worldwide, last year's ESMA changes made the British license way less attractive for regular traders. Australia's keen reputation has also played a pivotal role in the success of local brokerages.

Whether this continues or not, we're not sure it will persist for long. Right now, the ASIC asks locally regulated brokers whether they are intentionally targeting European traders. Even though this may not be the case, the accessibility of high leverage for European traders hasn't changed - they can still easily open a trading account with any of a number of Australian brokers.

That being said, product intervention powers are seeing the light of day in Australia. As recently as last November, a law aimed at allowing the regulator to limit certain products for individual traders was debated in the local Parliament.