Watch: ESMA Moves Push Industry Leaders to Focus on Asia

ESMA Regulations and the outlook for tokenization took center stage at the iFX EXPO Asia 2019 Industry Leader Roundtable.

As we take stock of last month’s iFX EXPO Asia 2019, we share some of the insights presented during our most popular panels, while we prepare for May and the upcoming iFX EXPO International in Cyprus. The effects of new regulations put in place last year by the European Securities and Markets Authority (ESMA) were the major focus of the FX Leaders Roundtable held on Day 1 of the iFX EXPO Asia 2019.

The panel featured several CEOs and thought leaders from across the industry and explored how the recent changes have impacted business operations in Asia. We also saw a lively debate about the outlook for crypto in 2019, with several different approaches from various market segments being represented.

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ESMA Regulations Increase Interest in Asian Market

The panel agreed that the European regulatory changes have given companies targeting Asia additional incentives to provide localized services. Prior to last fall, several foreign companies did business in Asia without maintaining a physical presence in the region.

However, ESMA’s new leverage requirements have forced brokers to segregate their European and Asian divisions and move personnel into local offices in order to continue providing higher margins to Asian clients. Greater investment in the region will help APAC remain a major source of market growth.

Jacob Platner, CEO of Scope Markets, noted “When regulation changes, obviously a big part of the industry will start to change with it, especially when you start looking at things that are important to clients, like service and a local touch… I think with new regulation, obviously players who are really looking to make an impact in the region and stay focused here are going to survive. And the ones that aren’t, will no longer survive.”

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Gavin White, CEO of Invast Global, confirmed increased demand in Asia, which he credited to the flow of brokers into the area. Prior to the adoption of the ESMA regulations, Invast Global had planned another office in Europe but instead decided to prioritize a new office in Hong Kong, which just opened in January 2019. Invast Global’s parent company is Japanese and based on his previous experience with Japanese regulations, White expects lower margins to ultimately have a positive impact.

According to White, “When the Japanese leverage restrictions came in there was an immediate fall in turnover overall, across the industry.  But then there was a big comeback in turnover, particularly in automated trading platforms… Retail traders who were no longer able to take large positions decided they wanted to trade more and wanted to be able to trade overnight while they were asleep and there’s a big push into automated trading services.”

The panel also noted that the regulations were expected to lead to increased brokerage stability, as companies who were unable or unwilling to diversify would find it difficult to compete. As Finance Magnates explored in our recent article on the ‘degamification’ of retail trading, under the new ESMA rules successful brokerages will need to treat clients as true investors rather than as gamblers. This approach should result in fundamental changes to trader acquisition strategies along with improved levels of support and analytical resources.

Preparing for Future Opportunities

The panel subsequently discussed new regulations under consideration by the Securities & Futures Commission (SFC) of Hong Kong. The SFC is exploring a new license type which would allow trading of several new CFD products. These instruments would provide brokers with new profit opportunities and offer another reason to focus on expansion in Asia. Crypto regulation was also a topic of discussion, with most panelists stressing the potential of blockchain as a technology over the adoption of digital coins as an asset class, although they were hesitant to commit to a regulatory direction.

For more insights on trading opportunities in Asia throughout 2019, we encourage you to visit the official iFX EXPO YouTube channel to watch our full selection of panel discussions.


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