The ASIC has little effect on foreign traders. Here's why...

Don't make the mistake of leaving your Australian broker and opening one in the Seychelles! ASIC has released proposals to launch a special license to allow Australian forex brokers to accept foreign traders.

Australia's forex brokers recently escaped to the Seychelles following the ASIC's planned ban on non-local traders. However, these brokers should probably consider turning around and coming back!

Forbidding Australian forex brokers from welcoming non-local traders would be a severe hit to their bottom line. The brokerage industry there has an excellent reputation and has never been the subject of any scandals or fund misappropriation. However, after a well-documented backlash, the ASIC is now considering allowing Australian brokerage firms to accept foreign traders, with the introduction of new and more lenient rules.

In a nutshell, business will likely resume as before, but with added paperwork for all involved.

The good news is that other countries are adopting a similar approach. This will be great for traders, who will benefit from a more stable trading environment, and for brokers, who won't experience such high client turnovers.

Australia's Minster Elison law office explains the new rules. They say that the new licence system for Australian Financial Service firms (AFSs) allows foreign providers if they are regulated in a jurisdiction sufficiently similar to the Australian one (as approved by ASIC). This way they can market trading services to Australian traders.

Foreign providers that want to sign up for a foreign AFS license must:

be authorised under a sufficiently equivalent foreign regulatory regime to provide the same financial services as those that the provider wishes to market in Australia
have a local agent appointed under the regime, unless the foreign financial service provider is a company
fully comply with the laws of its home jurisdiction relating to the provision of financial trading services to retail investors
understand and be able to comply with the obligations required for a foreign Australian Financial Service license
submit specific documentary proof relating to the above

Foreign Australian Financial Service license holders must comply with the following requirements:

ensure that trading services are provided efficiently and honestly
have adequate provisions for managing conflicts of interest and adequate risk management systems
comply with Australia's financial services laws and conditions of license

The countries who are deemed to have equivalent regulation are:

Canada
Denmark
France
Germany
Hong Kong
Luxembourg
Singapore
Sweden
The U.K.
The U.S.