With the US market regulated to a low growth market, Europe awaiting a similar faith besides showing natural signs of slowing down, the strategic decision many established brokers may want to take is look to markets that are still experiencing large growth numbers. By that I mean Eastern Europe to some extent, South America, Middle East and Africa as well, but Asia minus Japan in particular.
Now, don’t get me wrong. There is still plenty of opportunity in the more mature markets, and if you are a new broker looking to get a profitable and experienced client base, then luring away clients from other brokers in those markets (as well as tapping the new traders) can be a profitable exercise. However, if you are running marketing for a large brokerage or if you are simply unable to muster the large marketing budgets to be able to compete; Emerging FX Markets is where it’s at.
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Those markets have a lot of advantages but also some drawbacks. Let me start with the advantages. Advertising cost is lower and performance KPIs are higher, there is a large target audience and they are relatively price insensitive, regulation cost is low, staff costing is low and so on.
The drawback of targeting this audience is that they will have relatively low initial funding amounts, there are few experienced traders (and thus education is vital), there might not be a dependable regulatory framework and in some cases local ownership is needed. In addition, in many cases there are no good and targeted media options available, something that should be solved by savvy media buying and/or being a thought leader.
To summarize; as with investments, emerging markets can provide outsized returns but also pose a risk. Thread with caution and vision.