Aussie Brokers Respond to ASIC’s Retail CFD COVID-19 Report
- Aussie brokers have enjoyed a boost to trading activity and volumes amid COVID-19.
This week, the Australian Securities and Investments Commission (ASIC) released a report on retail trading of securities and contracts for difference (CFD) amid the coronavirus pandemic, revealing an uptick in both client accounts and client losses.
The report was based on data from 12 CFD providers within Australia that make up about 84 percent of the market share, so we reached out to some retail brokers within the country to see if this report is reflective of what they have been experiencing.
As Finance Magnates reported on Wednesday, ASIC said that during the focus period, which spans from the 24th of February to the 3rd of April this year, there was a sharp uptick in the daily number of unique client identifiers, which are indicative of new client accounts, associated with retail brokers. This is appearing for the first time in ASIC’s trade surveillance data.
During the focus period, an average of 4,675 new identifiers appeared per day, which made up a total of 140,241 identifiers ASIC had previously not observed. During the six months prior to the focus period, the authority observed 1,369 new identifiers per day and an average of 34,502 new identifiers appearing in a period of the same length.
Aussie brokers see an uptick in clients and volumes
ASIC also witnessed a large number of ‘dormant’ client identifiers from retail brokers. These dormant investors had not traded during the preceding six months but became active again during the focus period.
Speaking to Finance Magnates, Christopher Gore, the Chief Executive Officer of FX broker GO Markets, said: “The paper’s observation relating to new clients and increased trading volumes is broadly consistent with what we’ve seen. It would, however, be interesting to see a broader focus period to understand the impact on client P&L over time. I suspect the data may reveal a smoothing of P&L in the ensuing weeks of the focus period.”
For the following month, April 2020, ACY Securities has continued this momentum, with a 35 percent growth in accounts and a 55 percent uptick in trading volumes.
Towards the end of March, Vantage FX, another Australian-based broker, revealed to Finance Magnates in a previous interview that it had seen quite an increase in trading activity as well as onboarding interest over the prior few weeks.
GO Markets: further studies are needed
Although ASIC’s report does provide some good insight into the current situation in Australia, it is only looking at a six week period, and therefore, provides a snapshot of the current situation. With restrictions likely to remain in place in some shape or form for a while, and the COVID-19 pandemic will still pose a threat for months to come, market Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. Read this Term will remain.
As Finance Magnates explored in the Virtual Leaders Roundtable webinar, FX volatility is here to stay. After being asked how long recent levels of heightened volatility might persist, the speakers agreed that it wouldn’t disappear as soon as the lockdown measures end.
As highlighted by Andrew Edwards, the CEO of Saxo Markets UK, the longer the lockdown measures continue, the larger the damage there will be to the global economy. Once we are out of lockdown, then there will be a recovery period – government intervention, mergers, and acquisitions, etc., and uncertainty will persist – and where there’s uncertainty, there is volatility.
“I’m not sure we’ll see the same knee jerk reaction volatility we have seen over March and April, but we’re certainly in a new norm, and whilst that uncertainty exists, that volatility will be high… at least until the end of the year. I think if this lockdown goes beyond June, then I think we’re in for a tough time and a volatile time well into next year,” Edwards added.
“The paper also serves as a reminder of consumer demand for speculative products despite what are highly uncertain times. It would be interesting to see further studies on this,” continued Gore from GO Markets. “ASICs paper highlight the importance of being vigilant amid unprecedented market turmoil. We’ve engaged with our clients directly to highlight the material increase in volatility.”
This week, the Australian Securities and Investments Commission (ASIC) released a report on retail trading of securities and contracts for difference (CFD) amid the coronavirus pandemic, revealing an uptick in both client accounts and client losses.
The report was based on data from 12 CFD providers within Australia that make up about 84 percent of the market share, so we reached out to some retail brokers within the country to see if this report is reflective of what they have been experiencing.
As Finance Magnates reported on Wednesday, ASIC said that during the focus period, which spans from the 24th of February to the 3rd of April this year, there was a sharp uptick in the daily number of unique client identifiers, which are indicative of new client accounts, associated with retail brokers. This is appearing for the first time in ASIC’s trade surveillance data.
During the focus period, an average of 4,675 new identifiers appeared per day, which made up a total of 140,241 identifiers ASIC had previously not observed. During the six months prior to the focus period, the authority observed 1,369 new identifiers per day and an average of 34,502 new identifiers appearing in a period of the same length.
Aussie brokers see an uptick in clients and volumes
ASIC also witnessed a large number of ‘dormant’ client identifiers from retail brokers. These dormant investors had not traded during the preceding six months but became active again during the focus period.
Speaking to Finance Magnates, Christopher Gore, the Chief Executive Officer of FX broker GO Markets, said: “The paper’s observation relating to new clients and increased trading volumes is broadly consistent with what we’ve seen. It would, however, be interesting to see a broader focus period to understand the impact on client P&L over time. I suspect the data may reveal a smoothing of P&L in the ensuing weeks of the focus period.”
For the following month, April 2020, ACY Securities has continued this momentum, with a 35 percent growth in accounts and a 55 percent uptick in trading volumes.
Towards the end of March, Vantage FX, another Australian-based broker, revealed to Finance Magnates in a previous interview that it had seen quite an increase in trading activity as well as onboarding interest over the prior few weeks.
GO Markets: further studies are needed
Although ASIC’s report does provide some good insight into the current situation in Australia, it is only looking at a six week period, and therefore, provides a snapshot of the current situation. With restrictions likely to remain in place in some shape or form for a while, and the COVID-19 pandemic will still pose a threat for months to come, market Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. Read this Term will remain.
As Finance Magnates explored in the Virtual Leaders Roundtable webinar, FX volatility is here to stay. After being asked how long recent levels of heightened volatility might persist, the speakers agreed that it wouldn’t disappear as soon as the lockdown measures end.
As highlighted by Andrew Edwards, the CEO of Saxo Markets UK, the longer the lockdown measures continue, the larger the damage there will be to the global economy. Once we are out of lockdown, then there will be a recovery period – government intervention, mergers, and acquisitions, etc., and uncertainty will persist – and where there’s uncertainty, there is volatility.
“I’m not sure we’ll see the same knee jerk reaction volatility we have seen over March and April, but we’re certainly in a new norm, and whilst that uncertainty exists, that volatility will be high… at least until the end of the year. I think if this lockdown goes beyond June, then I think we’re in for a tough time and a volatile time well into next year,” Edwards added.
“The paper also serves as a reminder of consumer demand for speculative products despite what are highly uncertain times. It would be interesting to see further studies on this,” continued Gore from GO Markets. “ASICs paper highlight the importance of being vigilant amid unprecedented market turmoil. We’ve engaged with our clients directly to highlight the material increase in volatility.”