Australia has the biggest Forex/CFD market per capita in the world

After a record spike in activity 2 years ago, 2021 has maintained a very high number of Australian retail investors actively seeking to multiply their funds using contracts for difference (CFDs). Historical growth in the number of traders shows that Australia has one of the highest percentages of investors globally.

Over 105,000 Aussies traded FX/CFD contracts last year

Australia is one of the largest countries in the world in terms of size, but only has 26 million inhabitants. The country ranks among the largest economies in the world in terms of nominal GDP per capita (8th) and is one of the best places to live in terms of the Human Development Index (HDI).

Australia has a highly developed investment market, with at least 1.35 million retail investors active each year. This number has more than doubled over the past decade and was estimated at around 645,000 in 2010.

The Australian Securities Exchange (ASX) is among the world's top 20 exchanges by total market capitalization. In December, it amounted to over 1.8 trillion dollars (for comparison, the capitalisation of the largest exchange in the world was less than 28 trillion dollars).

The dynamism of the financial market and the large number of retail investors have resulted in a high interest in investing in leveraged derivatives markets, notably forex and contracts for difference (CFDs).

According to the latest data from the Investment Trends Report, over 105,000 Australians made at least one trade in the forex or CFD market last year.

On a per capita basis, it is among the highest in CFD/forex penetration in the world. To put it into perspective, the US margin forex market is only twice as big.

ASIC is one of the most respected financial regulators in the world

The Australian Securities and Investments Commission (ASIC) is responsible for regulating the country's financial markets, including the forex/CFD sector. The institution officially implemented regulations at the end of 2020 that significantly restricted the sale of CFDs to retail investors, limiting maximum leverage for major currency pairs to 30:1 and 2:1 for cryptos.

Australia has one of the best regulated derivatives markets, and the regulator's license is highly respected and recognized in the industry. In order to operate a legitimate financial business in the country, a company must obtain an AFS license, which is detailed on the regulator's website.

The latest report released by ASIC on the number of licenses issued shows that the institution granted 339 new AFS authorisations in the 2020-2021 financial year, receiving 565 applications for registration during the same period.

The number of retail investors in Australia increased by 45,000 in just 3 1/2 years

The Investment Trends Report released in January shows that the number of active retail CFD traders stood at 105,000 last year, slipping from the record high of 116,000 reported the previous year.

However, this is still a considerable increase over previous years. In 2017, 60,000 Australians made at least one transaction on this market; in 2018 and 2019, this figure fluctuated between around 76,000 and 78,000.

The year of the pandemic, which resulted in above-average market volatility, boosted retail trader activity, enabling a record number of active investors.

For comparison, in a country almost twice the size of Poland (in terms of population), the number of active retail traders is estimated at 59,000. In another part of the world, in Singapore, it is 48,000 .

Several factors may contribute to this result: the relatively high penetration of cash investments, which constitute a feeder market, the proximity of Asia, which tends to be fertile ground for fintech, a regulatory framework historically more accommodating; but the most direct link is probably the proliferation of supply, in the form of the many platforms participating in the market and contributing to its growth.

Tighter leverage regulations don't bother Australians

In recent years, Australia and the European Union have decided to further limit the leverage that individual traders can use. However, limiting leverage to a maximum of 30:1 for major FX currency pairs has apparently not scared off investors.