I was in Hong Kong recently for the iFX Expo. The expos in both Cyprus and Hong Kong have been a great meeting place for the retail FX community. The panel discussions are always informative but I find the most interesting conversations are outside of the venue. In the past, these conversations have centered on such topics as liquidity (tighter, deeper, cheaper…) and technology solutions, but at this event, the focus was on regulation.

 

Many of the brokers I spoke with want to be in a regulated environment. But they felt that actions taken by some of the most well known regulators have begun to harm, rather than help promote the industry. We all understand that the job of the regulator is difficult to say the least. They must provide adequate oversight to protect the end user clients yet give the brokers enough freedom to provide the clients the trading experience they demand. The real problem occurs when the rules change midstream and the regulator is trying to protect itself and not the end user.

 

We’ve seen many regulators reduce the leverage that brokers can offer, change the incentives that brokers can offer and limit the way brokers can market and advertise their products. This will be viewed positively by some end users but others are finding this very problematic. The retail FX world is not a ‘one size fits all’ market and brokers are looking for a way to provide the trading experience the client is looking for yet still stay compliant. That is proving more difficult. Some brokers I spoke with claim that clients are asking for an unregulated solution so they can continue to enjoy the trading experience they’ve come to expect.

 

So to answer the question posed in the title – brokers want the ability to offer multiple leverage and incentive schemes based on the level of experience of their clients, which doesn’t seem unreasonable. A multi layered leverage solution would provide better protection for the client than having them move to an unregulated trading venue.

 

If you would like to discuss the FX market or your brokerage needs please contact me at fscala@Tripeak.com