If you were wondering how much the market is reacting to the changing regulatory landscape, some key data might hold an answer. The migration of the industry and many clients into Australia has been ongoing ever since we heard about the upcoming changes to EU regulations.
Listed companies such as CMC Markets, IG Group, and Plus500 have either issued profit warnings or published disappointing earnings. The low Volatility across the spectrum is further pushing EU-centric brokers to the brink.
The shifting regulatory landscape has been a part of the industry since its inception. While the geographical hot-spots have been shifting across the globe, the bread and butter for the industry in Europe has remained largely unchanged for over a decade. As we all know, product intervention powers managed to shake the ground for retail brokers.
All that said, one strictly supervised jurisdiction remains. The land down under has become a magnet for retail brokers in recent quarters as the companies anticipated the stark changes to their revenue model from ESMA’s action last August.
Australian Brokers Rise Visualized
Thanks to the Finance Magnates Intelligence Department we have a visualization of how much flow has migrated to Australia over the past year. A sample from some of the regional strongholds shows that the shifting regulatory landscape is affecting trader appetites materially. It’s been over a year since the first reports about EU clients opening accounts with AU brokers.
The theme we see is undoubtedly confirming the regulatory migration across the industry. Clients who have maintained their risk appetite have figured out a way to find what they need - leverage in a secure regulated environment.
Australian and global retail Forex volumes in 2018, Source: Finance Magnates Intelligence
While global monthly retail forex volumes were marked at around $5.5 trillion in Q1, this figure declined to as low as $4.6 trillion in Q3, only to rebound slightly towards the end of the year. In the meantime leading Australian brokers AxiTrader, ICMarkets and Pepperstone reported a consistent increase in their trading volumes throughout 2018.
Top 3 Australian brokers account for 17% of volumes, Source: Finance Magnates Intelligence
As we see from the chart above, the total market share of Australian powerhouses on the global retail forex brokerage scene amounted to 12 percent at the beginning of the year and reached as high as 17 percent by the end of the fourth quarter of last year.
Client Flows
Australian brokers are not only benefitting from European clients choosing to migrate their accounts to a more leverage-friendly jurisdiction. They have also been attracting a global following from the rest of the world. The value of ASIC licenses has reportedly risen dramatically.
While the FCA has been a traditional go-to place for traders from all over the world, last year’s ESMA changes made the UK license less appealing to retail traders worldwide. Left with few alternatives except offshore brokers, the solid reputation of the Australian regulator played a role in the rise of local brokers.
Whether or not this trend continues for long, we don’t know. At present, the ASIC is asking locally-regulated companies if they intentionally target EU clients. While that might not be the case, the accessibility of high leverage for retail traders in Europe effectively hasn’t changed - they can always freely open an account with an Australian broker.
That said, product intervention powers are coming to Australia. As recently as in the fourth quarter of last year, a law which is looking to enable the regulator to limit some products for retail traders has been up for debate in the Australian parliament.
In the meantime, brokers in the land down under will continue welcoming all clients that they can accommodate legally, and European ones are most definitely lucrative for the industry.
