Australian Retail Forex Boom Part I

Forex Magnates recently did an article in their Q2 2011 Report covering the state of Forex in Australia. Through the

A fresh perspective from newcomer Synergy FX.

Forex Magnates recently did an article in their Q2 2011 Report covering the state of Forex in Australia. Through the research for this article, we discovered that FX is booming in Australia not only with existing brokerages but new shops are coming into play. One notable company is Synergy FX who recently opened for business, we sat down and interviewed Piers Cracknell of Synergy to get an inside look into why Forex is making waves down under. Second part of the overview will be an interview with an Go Markets’s COO Chris Reynolds.

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1. What is the current state of retail Forex trading in Australia?

Retail forex trading in Australia is in excellent shape and experiencing strong growth. Volume traded in the Australian Dollar has increased significantly, due in part to its very visible strengthening against other currencies, and so the currency markets are very much in the forefront of investors’ minds right now. In the last 12 months there have been a number of new entrants into the Australian marketplace, with a combination of overseas brokers establishing a local presence here and new Australian-owned businesses setting up. Australian forex traders demand a lot from their brokers, and rightly so. They want to deal with a local regulated broker who is working with them to achieve their financial objectives. They won’t deal with unregulated brokers or companies operating a dealing desk.

2. Do you foresee the tightening of local regulations anytime soon in the retail Forex industry in Australia?

Yes. I do expect ASIC, the financial regulatory body, to raise the minimum capital requirement level for new forex brokers. I see this as a good thing, meaning that only well capitalized firms will be able to acquire their financial services license and operate a retail focused forex brokerage. Of course just being well capitalized doesn’t necessarily protect the client any further, so I do expect a growing emphasis on the monitoring of risk, with the safety and protection of client funds being of paramount importance. Even with a certain amount of tightening of regulatory requirements, I don’t think Australia will be subject to the same degree of sanctions imposed recently in the US, which I do feel were overly strict.

3. Do you foresee Australia reaching the level of clients and deposits as the US and China?

With a nation of just 20 million people, Australia will never have the volume of clients and deposits that the US and China have. I do however see Australia in a huge growth phase right now and fully expect that the trading activity of retail traders to continually grow.

4. What do you attribute the recent boom of financial trading in Australia to?

I think there’s three main influencing factors. The strengthening of the Australian Dollar has been making headline news, and made the general public more aware about the effects, and in turn, the potential profitability by being able to take advantage of its movement. In the wake of the financial crisis, investors believe they can do a better job than the fund managers they’ve paid to deliver double-digits losses in recent years. And with the liquid nature and high level of technology now available to retail investors, many are. The Australian economy has been relatively unaffected by the global financial crisis, when compared to other economies, so their investment portfolios are relatively healthy, coupled with an optimistic outlook. The tightening of the CFTC rulings in the United States last year has caused brokers to relocate or establish presences overseas, and Australia has benefited from this, which has been reflected in a greater public visibility of forex trading as an asset class.

5. Why should local Australians and international traders alike, trade with your firm?

Synergy FX really has a unique combination of factors at play. The management team has over 100 years of financial experience between them and is highly regarded in the forex markets. For example in 2008 I was invited by Bank of England to give my opinion of forex trading at retail level; other members of the Board have worked in Operations and Treasury departments of some of the largest banks, so it’s that first-hand experience that has created Synergy FX. We’re ASIC regulated, so peace of mind for traders, and client funds are held in segregated client trust accounts with a AA rated bank. We’ve adopted a very transparent model that support the retail trader – straight through processing, no dealing desk, and with our multi-bank liquidity, traders are receiving prices from up to 20 banks. We provide free trade signals, alerting clients to trade opportunities as they occur – this is a huge time saver. We also provide the latest Virtual Private Server technology so our clients can get full Metatrader 4 access on their Iphone, Ipad, Android and MAC.

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6. Where does FX go from here both in Australia and Globally?

High speed or high frequency trading will continue to grow. High frequency trading accounted for around 30% of all forex flows in 2010, up from 13% in 2004, so by the end of this year you could see this up above 40%. The majority of the growth in daily turnover, which is now above $4 trillion, is due mainly to high frequency trading. This has lowered spreads and led to an increase in FX volatility, you’ll see this in sudden price spikes when automatic orders in large volume flood the market. Spreads on the majors are extremely tight so I don’t see much further compression here In Australia, I expect the number of new entrants coming into market place to continue, albeit under the potential of changing regulatory rules and increased capital requirements. Established firms will widen their product offering through the use of additional services – the broker that goes above and beyond the standard offering will thrive.

7. Why did you decide to open a Forex Brokerage?

The management team all have a background in financial markets and worked for some of the most successful forex firms globally, so forex is what we know. We’ve seen traders continually disappointed by firms running dealing desks, or slipping customers – so when we set up Synergy FX we decided to be completely transparent in how we operate. That’s the whole idea of a synergy – the combined output is greater than the sum of the individual parts – and we believe that trader’s using our technology is a win-win for both parties. Here is their most recent press release announcing their formation and some of their services.

Executive Director Piers Cracknell comments, “Synergy FX reaches far beyond the traditional brokerage offering. We provide full MetaTrader 4 capability to all clients, whether it’s an asset manager using our MAM to manage multiple accounts, or a retail trader receiving trade alerts on their iPhone, our overall product offering is unique.”

Receiving liquidity from up to 20 banks, Synergy FX operates as a straight through processing broker.

“Our clients take peace of mind from the fact that we have no dealing desk. With no dealer intervention and straight through processing, trade execution is super quick. “We’ve invested heavily in our technology. Through our multi-bank price feed, we receive a deep source of liquidity from the world’s largest banks, allowing us to provide interbank pricing to all traders”

Highlighting just one part of their service, trade signals alert their clients to trade opportunities by continuously scanning the markets on their behalf. In addition, most forex brokers’ mobile trading offerings only allow limited MT4 capability, whereas Synergy FX’s clients enjoy full benefit of MT4 on their mobile handset or tablet, including automated trading, use of indicators and trade alerts.

The result of bringing together industry leading technology is that Synergy FX has established an international reputation as a leading forex player. Synergy FX is based in Sydney, Australia.

About Synergy FX

Synergy FX is an execution only forex brokerage firm providing the MetaTrader 4 platform. The company provides interbank pricing, straight through processing and mobile trading on all major currency pairs. The company is licensed and regulated by ASIC (AFSL number 403863) and maintains segregated client accounts with Commonwealth Bank of Australia.

Check out the full report of The Forex Boom in Australia in the most recent Forex Magnates Quarterly Report.

Grab your latest copy of the Forex Magnates Retail Forex Industry Report.

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