“China is not an open market, but it is a great market,” Sophie Squillacioti, MultiBank’s Head of China Sales, told Finance Magnates when discussing the intricacies of the Chinese forex and contracts for differences (CFDs) market. She added: “The Chinese market is very developed in this industry.”
“Many mistakenly believe that the Chinese market is new, but in reality, it’s very developed. The traders there are very sophisticated, the technology is very sophisticated,” Squillacioti said. She added that “the demand is relatively easy compared to other South Asian markets.”
Squillacioti has spent the last two decades in the retail trading industry, with most of her roles remaining China-centric. She was also stationed in China for many years while working for multiple brokerage brands, but now manages MultiBank’s operations in China from Dubai. She confirmed that MultiBank has no physical presence in China at this point.
“My role is basically to take MultiBank back into the Chinese market,” she explained when talking about her responsibilities. “They were in China for a long time but exited due to business strategies. Now they’re looking to go back in, and my role is to build up the channel functions.”
Deposits in “Several Thousands of Dollars”
However, the Chinese market remains lucrative. According to Squillacioti’s experience, the average deposits by Chinese traders are “quite high and can go up to several thousands of dollars,” which is “in line with European deposits.” However, she pointed out that “there are broad spectrums” and it “depends on the brokers too.”
Regarding trading volume, Squillacioti noted that “it’s high, very high, which aligns with the Chinese thought process and interest in speculation.” However, these numbers vary from broker to broker, and none of them reveal market-specific volumes.
Despite the attractive Chinese trader base, the FX and CFDs industry operates within a grey area in China. The Chinese government does not regulate the CFDs industry, but neither does it ban it.
“If That Will Exist in the Future, We Do Not Know”
“There’s no local regulation,” Squillacioti said. She added: “If that will exist in the future, we do not know. Until now, the decision has been not to open that market up. So, most brokers operating in that market and onboarding traders do so under foreign licenses, mostly offshore, such as Mauritius and Seychelles, which have been around for quite some time.”
MultiBank, which holds more than a dozen regulatory licenses globally, “will be looking to onboard Chinese traders under its Cayman Islands license.”
“China Is More Open than Some Other Markets in Asia”
Similar to most of Asia, China is also a “very localized” market for retail trading. Squillacioti noted that businesses “certainly do need Chinese speakers for sales and service.” However, she added: “It is more open than some other markets in Asia, and there are some acceptors of the English language.”
“Chinese traders will open a platform or website that is translated into the local language, but there is a need for Chinese-speaking customer service operations,” she said.
However, marketing can be challenging for foreign brokers entering a localized market, such as China. According to Squillacioti, “There are quite a few online platforms and companies out there where you can place banner ads” to promote brokers. She added that “there’s obviously the traditional introducing broker routes, which is still very popular in these Asian markets. So, the most sought-after route is developing relationships with IB businesses.”
It is worth noting that the services of Introducing Brokers, or IBs, remain very popular in developing markets like Asia, Africa, and Latin America. Although IBs need licenses to operate in markets like the UK, there are no concrete regulations for them in the Chinese and other emerging markets.
Squillacioti further acknowledged that operating in a market like China without any license or regulation can be “challenging.” Payments, which enable deposits and withdrawals, are also a big challenge in China, but according to her, “PSPs and other third-party companies facilitate payments in and out, and that tends to work well.”
“The Chinese market is a very popular market,” she continued, “but similar to any other market, it has its challenges. Brokers must know their clients and business very well. Generally speaking, I would say the number one mistake that companies make is an unwillingness to localize. I think localization is really important in Asia, and that’s not just all about localization at the country level.”
