Exclusive: Turkish Forex Industry Takes Action Against Crippling New Regulations

Members of the retail Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term trading industry in Turkey are raising concerns against tough new regulatory limitations that could kill their business. Brokers are currently holding an emergency meeting of the Turkish broker house association to discuss their ability to fight the limitations and some have established a website (ForexTebliginiGeriCek) where employees and clients can sign a petition protesting against the harsh demands.

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On Friday, the Capital Markets Board of Turkey (CMB), the national financial regulatory and supervisory agency, announced a raft of changes to its forex regulations with immediate effect. The consequences of these restrictions are hard to predict but brokers fear that they include potentially serious outcomes for both investors and workers within the forex industry.

The main issue at stake is that, while the CMB aims to protect small and nonprofessional investors from speculative trading activities and extreme market movements, the limitations are unfair for investors wishing to trade in forex instruments. These include a very high minimum deposit of TRY 50,000 (about $13,500) and a very low maximum leverage of 1:10.

Brokers in Turkey expect that potential clients might turn to unregulated offshore operations in response to the new limitations, exposing them to risks and avoiding the regulations that are meant to protect them all together. They also warn that many Turkish websites that depend on ad revenue from forex brokers will be hurt.

They write: "In addition to the obvious setbacks mentioned above, the new restrictions will be a return to the situation before 2011, when things radically changed due to the introduction of regulatory changes following years in which forex clients suffered from scams and frauds. Many small investors may find themselves shut out of important investment opportunities, and may possibly fall into the hands of unlawful or unregulated fraudsters that advertise extensively on the Web, and allow higher levels of leverage with less cash collateral, such as binary option providers."

The brokers believe that the best solution is not to restrict small investors, but rather to focus on educating them to consider risk before making investment decisions.