If you were thinking about obtaining an Australian license to provide high leverage trading to your clients, we have some bad news. The prices of companies regulated in Australia and permitted to offer CFD brokerage services have skyrocketed in recent months.
According to trusted sources, a price of $4 million (that is USD) is what you will have to pay if you badly want one. The trend-setting changes of regulations in Europe have caused brokers to look for alternative regulatory jurisdictions in record numbers.
The ASIC has been reluctant to give out new retail broking licenses for some time now. Fearing repercussions of companies which are focusing on markets outside of Australia, the home regulator has made it very difficult to increase the number of retail forex and CFDs brokers.
The current waiting times for acquiring an ASIC license are between 18 and 24 months, sources shared.
The Australian subsidiaries of brokerage companies are technically allowed to onboard European clients. At least this is what several EU-regulated companies claim. They have been silently moving clients to ASIC-regulated subsidiaries on request.
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The regulatory arbitrage opportunity in Australia is taking the market by storm with the popularity of the ASIC license growing swiftly. While the European regulators are looking for ways to protect clients by limiting leverage, the Australian regulator has been focused on client funds.
The global uniformity in financial regulation which was agreed upon by the G20 in the aftermath of the financial crisis of 2008 is still in play. While the Australian regulator is traditionally trailing behind, the shift of market players to the region could end up being the trigger for more regulation.
A number of offshore alternatives are still present. Several brokerage companies have set up subsidiaries all over the globe from the Bahamas to Vanuatu. Trust is an issue with such jurisdictions, but clients who are willing to trade with 500:1 leverage is not the most risk-averse crowd.
There is still one more alternative in Europe. The Swiss authorities have maintained an independent regulatory framework from the ESMA, despite being open to adopting other parts of pan-European financial regulation.
In any case, the capital intensity of the retail brokerage business is getting high. As high as $4 million if you are planning to open shop in Australia. And remember to be cautious once you get one, one company has already shown us how not to use an ASIC license.