The past few years have seen a totally overhauled playing field for brokers, driven by new regulations across some of the biggest jurisdictions.
These changes have forced brokers to adapt, with 2020 looking to be a make or break year for many venues. To date, some brokers have been dealing with these changes better than others.
The forex market is very developed one that constitutes trillions in turnover every day. Less than six percent of this market is reflected by retail trading, though this is the segment which has drawn the highest levels of regulatory scrutiny.
Nowhere is this truer than in the UK, one of the largest forex markets. The country’s Financial Conduct Authority (FCA) has since completely changed the game for brokers, making it one of the tightly monitored markets in Europe.
In addition to new disclosures for profit loss ratio of client accounts, brokers forced new leverage requirements, including a cap of 50:1 for retail clients.
Bonus practices were also targeted with scrutiny as well, hammering brokers’ marketing campaigns.
More recently, the FCA has also take aim at contracts-for-difference (CFDs), with new leverage caps.
These moves were not driven only by the FCA however, as the Cyprus Securities and Exchange Commission (CySEC
CySEC
The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision
The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision
Read this Term) also followed suit with leverage restrictions of their own.
Looking at the totality of these measures, it seems that leverage caps are just justifiable measures taken to protect individual traders.
Indeed, many brokers even endorsed these measures at the time of their implementation.
However, even from the beginning, many brokers were worried about what was seen as excessive leverage restrictions.
This was the area of greatest emphasis from regulators, which were worried about the market risks of leverage in relation to both, brokerages and their retail clients.
What has and will change for brokers in 2020
To deal with these new measures, many brokers have been forced to adapt, creating a more tightly regulated and competitive market. This is in and of itself not a bad thing.
Interestingly, out of these restrictions have come newer drivers. For example, Liquidity
Liquidity
The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent
The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent
Read this Term is the new leverage for many and is one of the most critical elements of forex.
A wide range of authoritative financiers have criticized leverage caps as they dramatically decrease market liquidity.
While regulators focus on balancing the markets with leverage restrictions, the opposite effect might take place as a direct result of such limitations.
Overall, 2020 looks to be more of the same, with other jurisdictions possibly catching up to the FCA and CySEC in terms of protectionary measures.
Many brokers have also tethered themselves to crypto offerings, which in 2019 saw a massive overhaul in the way offerings are marketed and relayed to the public.
More than ever before to succeed in 2020 brokers need to be smart, focusing on a well-rounded offering. CFD trading is on the climb, whose flexible trading is an appeal to many.
Additionally, marketing constraints have also hit brokers hard, which means its harder than ever to cast your net over the pool of potential forex trading clients.
Many brokers have succeeded despite these limitations, such as Instaforex which has consistently stayed ahead of these big regulatory moves.
The brokerage continues to attract clients globally with its versatile offering that includes MT4 and MT5. After a bit of a lag initially, brokers are now finally flocking to the MT5 portal as the de-facto choice for trading.
2020 will see a further emphasis on MT5 as traders have begun demanding features that cannot be found on the older MT4 variant, having fallen behind.
Disclaimer: The content of this article is sponsored and does not represent the opinions of Finance Magnates.
The past few years have seen a totally overhauled playing field for brokers, driven by new regulations across some of the biggest jurisdictions.
These changes have forced brokers to adapt, with 2020 looking to be a make or break year for many venues. To date, some brokers have been dealing with these changes better than others.
The forex market is very developed one that constitutes trillions in turnover every day. Less than six percent of this market is reflected by retail trading, though this is the segment which has drawn the highest levels of regulatory scrutiny.
Nowhere is this truer than in the UK, one of the largest forex markets. The country’s Financial Conduct Authority (FCA) has since completely changed the game for brokers, making it one of the tightly monitored markets in Europe.
In addition to new disclosures for profit loss ratio of client accounts, brokers forced new leverage requirements, including a cap of 50:1 for retail clients.
Bonus practices were also targeted with scrutiny as well, hammering brokers’ marketing campaigns.
More recently, the FCA has also take aim at contracts-for-difference (CFDs), with new leverage caps.
These moves were not driven only by the FCA however, as the Cyprus Securities and Exchange Commission (CySEC
CySEC
The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision
The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision
Read this Term) also followed suit with leverage restrictions of their own.
Looking at the totality of these measures, it seems that leverage caps are just justifiable measures taken to protect individual traders.
Indeed, many brokers even endorsed these measures at the time of their implementation.
However, even from the beginning, many brokers were worried about what was seen as excessive leverage restrictions.
This was the area of greatest emphasis from regulators, which were worried about the market risks of leverage in relation to both, brokerages and their retail clients.
What has and will change for brokers in 2020
To deal with these new measures, many brokers have been forced to adapt, creating a more tightly regulated and competitive market. This is in and of itself not a bad thing.
Interestingly, out of these restrictions have come newer drivers. For example, Liquidity
Liquidity
The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent
The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent
Read this Term is the new leverage for many and is one of the most critical elements of forex.
A wide range of authoritative financiers have criticized leverage caps as they dramatically decrease market liquidity.
While regulators focus on balancing the markets with leverage restrictions, the opposite effect might take place as a direct result of such limitations.
Overall, 2020 looks to be more of the same, with other jurisdictions possibly catching up to the FCA and CySEC in terms of protectionary measures.
Many brokers have also tethered themselves to crypto offerings, which in 2019 saw a massive overhaul in the way offerings are marketed and relayed to the public.
More than ever before to succeed in 2020 brokers need to be smart, focusing on a well-rounded offering. CFD trading is on the climb, whose flexible trading is an appeal to many.
Additionally, marketing constraints have also hit brokers hard, which means its harder than ever to cast your net over the pool of potential forex trading clients.
Many brokers have succeeded despite these limitations, such as Instaforex which has consistently stayed ahead of these big regulatory moves.
The brokerage continues to attract clients globally with its versatile offering that includes MT4 and MT5. After a bit of a lag initially, brokers are now finally flocking to the MT5 portal as the de-facto choice for trading.
2020 will see a further emphasis on MT5 as traders have begun demanding features that cannot be found on the older MT4 variant, having fallen behind.
Disclaimer: The content of this article is sponsored and does not represent the opinions of Finance Magnates.
