Category Archives: Regulation

See all posts talking about Regulation, from the Forex Figures – the DailyForex blog

Introducing the FX Global Code of Conduct

The Forex industry has long been plagued with complaints of improprieties on behalf of brokers, despite the heightened regulation and increasing number of watchdogs whose goal is to supervise brokers and to make sure that they act within accepted legal and ethical guidelines.  To protect Forex traders and to keep brokers on the straight and narrow, the FX Global Code of Conduct was launched in May 2016 as a precursor to the document that was released earlier this month by the Bank of International Settlements.

The code is designed to create a fair, liquid, open and transparent market where traders are protected and supported by a solid industry infrastructure.  The Global Code was developed by a partnership between central banks and Market Participants from 16 jurisdictions worldwide.  Among the guiding principles are:

  • Market Participants are expected to behave in an ethical and professional manner to promote the fairness and integrity of the FXM Market.
  • Market Participants are expected to promote responsible engagement in the FX Market and to have an effective governance framework to provide for comprehensive oversite of their activity.
  • Market Participants will comply with laws and regulations applicable to them in the jurisdiction in which they do business.

As it stands, the Global Code is meant to include Market Participants which are outlined as all persons or organizations engaged in the Forex market including, but not limited to organizations such as financial institutions, central banks, asset managers including sovereign wealth funds and hedge funds, non-bank liquidity providers, brokers, trading platforms, money changes and money services.  The Global Code confirms that all Market Participants will act in an ethical way and to be aware of potential conflicts that will need to be resolved with professionalism and care.

The initiative is a good one – there is certainly room for additional oversight and a commitment to moral activity within the Forex industry.  However, we question whether the initiative will be successful on the global level as there may always be brokers who are likely to engage in unscrupulous behavior in an effort to dupe innocent traders out of their money.  For this reason, we suggest that in addition to engaging a code of conduct for Market Participants, it is also critical for traders to know their rights and to understand that such a Global Code exists, so that they insist upon choosing a broker or other financial service provider that will maintain the highest standards of ethical and professional integrity.  Only with proper education on the traders’ side and honorable intentions on the side of Market Participants, will we be able to make strides against Forex fraud.

Changes to Turkish Forex Regulation – What Do They Mean?

In recent months the Capital Markets Board of Turkey, the Turkish regulator implemented dramatic changes on the way the industry functions. Among the changes were the new requirement for a minimum deposit of TRY 50,000 for any Forex trading account, and a maximum leverage of only 1:10, lower than even The United States’ NFA imposes. The Turkish Capital Markets Association has tried to ease these restrictions but has thus far been unsuccessful in reversing these unquestionably harsh restrictions.

Traders and Forex brokerages are concerned that the restrictions will cause lower trading volume and liquidity which will force traders to pay higher spreads and will thus perpetuate a spiral of lower trading volumes or will cause Turkish Forex traders to pursue trading offshore trading opportunities, which at this point have not yet been thwarted by Turkish regulators (and the question remains as to whether Turkish regulators will be able to control offshore trading activities for its nationals due to the open nature of the global currency markets).

There have been several Turkish Forex brokers who have paused their business activities in response to the regulatory changes, and other who have closed their doors entirely. But interestingly, there have also been several new, unregulated brokers located outside of Turkey’s physical borders that have begun recruiting Turkish Forex traders. Whether or not the Capital Markets Board will come after these brokers remains to be seen, but there’s no question that the shift in the industry has been significant. We will continue to monitor the situation and to report on the newest regulatory changes as they become relevant. We will also continue to monitor the activities of Turkish Forex brokers and to honestly review the remaining brokers that can accept Turkish traders. If you’re interested in trading Forex in Turkey don’t let the regulators scare you – just make sure that you know how the market functions before you get started.

FXCM Bounces Back over 70% to $19 on NYSE

By: DailyForex.com

FXCM, long considered one of the strongest and most reputable Forex brokers worldwide struggled notably in 2015 on the heels of the Swiss National Bank catastrophe. Among other dramatic turns the brokerage was forced to take out a loan and to sell off some of its assets. Then, in September, FXCM was notified by the New York Stock that it was not in compliance with the continued listing standards set forth in Section 802.01C of the Listed Company Manual of the New York Stock Exchange because its price had fallen below $1 per share for a period of over 30 consecutive trading days. At that time we’d speculated that anyone with confidence in the industry and in this leading company could turn a nice profit by investing in its undervalued stock.

fxcm-inc-logo

At the same time FXCM confirmed its confidence in the company and presumed that it would turn things around – and it seems that this confidence was not purely smoke and mirrors. FXCM has come through for its clients and anyone who invested in the stock over the last few months and held their positions has likely seen massive profits – at the close of trading yesterday FXCM shares were valued at over $19. On a day where the Dow Jones Industrial Average lost 367 points, this is an even more notable victory. The price is more than trip the $5.20 that the stock was priced at only last month.

The turnaround in stock price is significant for FXCM, as it demonstrates confidence in the brand not only by its own traders but by other financial investors who are looking to invest in solid growth. We look forward to seeing what company brings forth in 2016 – and we’re expecting greatness.

NFA Raises More Margin Requirements

Following its announcement last week that it would raise the minimum security deposits for transactions involving the Norwegian krone, the Swedish krona and the Swiss franc, the US regulatory body announced that it will also be changing the margin for Forex brokers offering five other currency pairs. Although US brokers can currently offer leverage up to 50:1 (2% margin) on major currency pairs, the NFA announced its intention to raise the margin on two popular currencies, the Japanese yen and the Australian dollar, to 3%. The NFA also increased the margins on the Russian ruble, the Mexican peso and Brazilian real. The changes for these exotic pairs were increased to 20% for the ruble, 9% for the real and 6% for the peso. All increased margins will be valid until further notice. Though such limits may restrict profits on these pairs they also prevent extreme losses which, after last week’s challenging volatility, may be some form of relief for traders.

FXCM, one of the leading Forex brokers worldwide issued a statement on January 21, 2015 stating that it will adjust its margin requirements globally for all Forex instruments and for gold, to make the global margin requirements consistent with the firm’s US entity, FXCM LLC which has always had more conservative requirements as per the demands of the NFA. Despite rumors of trouble at FXCM, the industry leader has shown itself to handle recent losses with notable grace, responsibility and with an eye towards a strong future. The brokerage’s decision to keep the public fully aware of internal decisions, bailouts and policy changes is an excellent step in maintaining (and restoring) confidence for both retail and institutional traders worldwide.

Gain Capital, the parent company of Forex.com, has also publicly acknowledged its own conservative approach; the broker was one of few that raised margin requirements for EUR/CHF in September 2014, making it possible for the broker to profit from the SNB decision and to weather the volatility without any major fanfare.

Though many traders enjoy the risk of high leverage and relish in the rewards (or potential rewards), it seems that the cautious policies of the NFA will be rolled out globally to help protect traders and brokers from dangerous losses.

 

NFA Imposes New Leverage Limits on U.S. Brokers

Early this morning, the U.S. National Futures Association announced new limits upon the maximum leverage that U.S. Forex brokerages may offer clients in trading certain currencies. The new limits will apply from 5pm CST today, Thursday 22ns January. Concurrently, the troubled FXCM which dominates the U.S. Retail Forex market announced even heavier limitations.

The National Futures Association made this move under NFA Financial Requirements Section 12, which had been limiting the leverage brokers may offer to 50:1 in 10 listed major foreign currencies (including the Swiss franc, Swedish krona and Norwegian krone), and to 20:1 in all other currencies.

From today, brokers will be required to limit leverage in transactions involving the Swiss franc to 20:1, and in transactions involving the Swedish or Norwegian krone, the maximum leverage will be 33:1.

FXCM have announced even more onerous limits, which will go as low as 2.5:1 on EUR/CHF. In fact, by the beginning of next week, FXCM will have reduced all the leverage limits they were offering yesterday by a factor of 4, meaning that FXCM clients will effectively have their maximum position sizes reduced by 75%.

FXCM have announced that these new limits may be temporary, owing to volatility that may be triggered by the ECB QE announcement expected later today, and the Greek general election due Sunday.

Several other brokers have also been lowering maximum leverage offered to clients. This should increase the pressure on clients with smaller account sizes to be more properly capitalised, and lower the risk to Forex brokerages of catastrophic losses.

Brokers that Got CySEC Regulation in 2014

cysecSqueaking in right under the wire, FXPRIMUS has joined the ranks of brokers that were granted CySEC regulation in 2014. In fact, 2014 has seen quite a number of brokers receiving CySEC regulation, with over 12 brokers listed among the Cyprus Securities and Exchange Committee’s growing list of CIF licensees (See list below). This number is considerably more than the brokers that received CySEC regulation in 2013 which included EZ Trader and OptionsXO.

Research has shown that by December 2013, only 16 of the world’s largest 47 brokers (34%) were regulated by an acceptable regulatory organization. However, with more and more brokers receiving regulation each year, there is a good chance that in the future Forex and binary options traders can expect to see a greater choice in brokers that offer security and reliability under an acceptable monitoring body.

Here is some of the brokers that received CySEC regulation in 2014:

Boursotrade

Capitalindex

Bcfxbroker

Dragonoptions

Leadcapitalmarkets

Stockpair    

24xp

kboption

interactive-option

Plus500

Rcapitalsolutions

Symmetriafs

 

LQD Markets Surrenders CySEC Regulation

As of July 31st, Forex broker LQD Markets Ltd will not be regulated by Cysec, the Cyprus Securities and Exchange Commission under which it has been governed until now. As first reported by Forex Magnates, LQD Markets has renounced its authorization to provide investment services and related activities and has allowed the CySEC investment firm’s license number for LQD to expire as of start of August 2014.

LQD Markets has been under scrutiny for some time now. Back in June 2013, they had been cited for potential violations of Article 36 of the 2007 Investment Services, Activities and Regulated Markets law wherein they had offered investment services through third parties without first receiving the proper authorization from the regulatory authority.

CySEC went on to confirm that Liquid Markets had ceased its relationships with the said third party entities and had paid the 80,000 penalty Euro to the watchdog. Very little detail was provided by the regulator in regards to the nature of the potential regulatory violations that Liquid Markets were meant to have been engaged in and the FX broker continued to conduct Forex services up until the present.

LQD Markets informed its clients two months ago that the Cypriot entity would stop functioning in July and that it must transfer its accounts to the British Financial Conduct Authority (FCA) regulated entity, LQD Markets UK. No explanation for the decision to abandon CySEC authorization was given but since an FCA license is more expensive to receive and maintain one might think that was an additional reason for the switch.

Ever since Cyprus became a member of the European Union in 2004, CySEC has become part of European MiFID regulation which provides firms registered in Cyprus access to all European markets. Many overseas firms have since jumped on the CySEC bandwagon, registering in Cyprus to take advantage of this regulatory regime.

Of the two regulators, the FCA license carries a bigger brand value, an important factor for those brokers focusing on attracting English-speaking clients or with potential M&A action in the UK market. Several other major Forex brokers such as AvaTrade and Markets have opted for FCA regulation to that of CySEC.

In accordance with the securities law in Cyprus, LQD Markets Ltd will remain under the supervision of the commission until it settles all its obligations arising from the investment services and activities that happened in the past.