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#1 04-03-2020 15:29:19

johnedward
Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 2801
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Australian market growth subject to increasingly rigourous regulations

Australian market growth subject to increasingly rigourous regulations


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Over the past few years, Australia's forex industry has grown exponentially. Australian trades now represents 16% of the world's total transactions volume (which represents $123,000 billion). This claim is supported by ASIC data, according to which we now know that of the 59 licensed companies that offer forex trading in Australia, there are 1 million customers trading $22 trillion annually (double the previous year) and a staggering 680 million annual transactions.

Many analysts and experts have attributed this exponential growth in the Australian CFD market to regulatory changes. Faced with significant regulatory changes, including the implementation of intervention powers on ASIC products, changes in industry habits to attract foreign customers following the ASIC's press release and the implementation of product design and distribution requirements - will the Australian market remain the largest?

Regulatory changes are coming

A series of regulatory changes have been made in Australia over the past few months, and the implementation of some of them is expected to take place within the next 5 months.

These include product intervention powers, for which ASIC has proposed several new regulatory conditions. It is not known when these conditions will be published as a final regulatory instrument, but it is possible that they will be published quickly. The proposed conditions are:

Arrow mandatory 50% margin closing protection;
Arrow protection against negative account balances;
Arrow a ban on incentives such as discounts, bonuses and cash-back rewards;
Arrow a risk warning disclosing the percentage of individual traders that record net losses;
Arrow the real-time disclosure of the day-to-day financing costs to be displayed on the broker's trading platform in the form of an annualised interest rate and an estimated cost in the CFD's currency;
Arrow real-time disclosure of total position sizes;
Arrow optimal execution requirements;
Arrow restrictions on leverage.

Outside of product intervention powers, the Australian market was shaken by the ASIC's announcement, which warned Australian brokers that by accepting foreign traders in circumstances where it would be illegal to do so, companies could lose their financial services license.

As 82% of the volume of Australian brokers is generated outside of Australia, the press release posed a major existential crisis. However, market practice developed when brokers asked for a legal opinion on the legality of accepting foreign clients when they hold a significant part of their clientele from this jurisdiction. As a result, this release did not have as big an impact as we thought. In a recent informal survey of a sample of OTC derivative issuers, only a handful said that the ASIC had followed through on this issue. However, ASIC maintains that the OTC derivatives sector will continue to be a priority this year.

Another requirement that is expected to have far-reaching consequences for the Australian forex industry is the design and distribution regime which will be implemented in April 2021. The final ASIC guidelines have not yet been been published on how these obligations should be implemented, but it is expected that ASIC will continue to be firm.

The Australian market is still robust

The good news: Australia will always be a leading player in the forex trading industry. Global perception rightly considers that ASIC has great protections for traders, such as capital requirements and segregation of funds. The AFCA provides traders with a simple and inexpensive method of resolving disputes with brokers. Australia has a solid banking system. Local brands remain strong. These companies have created talents in the industry that are indelible on the world market. The personnel of these local companies will travel around the world to transfer their know-how or will settle locally in the Australian branches of companies founded abroad. Given ASIC's reluctance to issue more licenses for currency trading, it is unfortunate that more companies cannot entering this workforce-based market.

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