Exclusive: Brokers in China Claim ‘Business as Usual’, Regulatory Concerns Rising

Retail FX and CFDs brokers swiftly restart operations after temporary website access restrictions.

Rumors about brokers operating in China having difficulties with access to their websites have been picking up in recent weeks. Investigating the matter, Finance Magnates reached out to a number of brokers and consultancies operating on the ground for their perspective.

Choosing not to go on the record, brokers shared that despite some operational difficulties in China during the past couple of weeks, they are in ‘business as usual’ mode. Several companies shared that facing challenges from some local authorities is something normal and their businesses have not been materially affected so far.

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Industry insiders shared the standard operating procedure to go around the limitations: while a given website might be blocked for a relatively short period, the URL through which it is operating in a particular region or the whole country is quickly amended to go around the ban.

Since the retail foreign exchange and CFDs trading business in China is largely facilitated by IBs, the instant distribution channels that the local broker partners have mitigates the impact of any website access restrictions.

One broker confirmed to Finance Magnates that a couple of weeks ago, Chinese authorities stopped all websites without ICP certificates. After a short upgrade executed on the same day, firms upgraded their websites to a secure protocol, thereby instantly re-enabling access from within China.

This Time Could be Different

A Chinese self-regulatory organization is most likely to be at the core of the latest developments on the Chinese forex and CFDs market. The National Internet Finance Association of China (NIFA) was initiated by the People’s Bank of China in collaboration with relevant ministries and commissions including the China Banking Regulatory Commission (CBRC), the China Securities Regulatory Commission (CSRC), and the China Insurance Regulatory Commission (CIRC).

The NIFA made an official announcement last week: “Recently, through monitoring by financial regulatory bodies and NIFA, significant financial and social risks have been identified in the increasing illegal leveraged trading activities in multiple financial products on various kinds of online platforms.”

The announcement elaborated that all kinds of trading activities in financial instruments such as foreign exchange, precious metals, futures, and indexes are illegal without the approval of Chinese authorities.

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“Trading services which are provided by foreign institutions to domestic investors via desktop and mobile trading platforms without the approval of China’s financial regulators constitute a violation of the law,” the announcement continued.

The NIFA states that online platforms engaging in the above businesses are illegal, and the rights of both parties in such trading activities are not protected by the law.

Sources with knowledge of the matter asserted that the legal basis of the announcement is questionable at best.

In the meantime, access to broker websites is now fully restored via changes to URLs and the addition of new security certificates.

Long Persisting but So Far Small Problem

The difficulties that retail brokers are facing when delivering their services to one of the hottest markets in the industry have been well known for years. Despite the Great Chinese Firewall, Chinese clients have been very resilient in their demand for financial services from offshore.

Eugenio Accongiagioco, CEO of APAC Management Consultancy, which is a consultancy firm that has been helping brokers to get into China, said to Finance Magnates: “We’ll need to see what happens in the next few days: if the new modified URLs will remain accessible, then maybe this issue was just a one-off indirect warning.”

“Conversely, if these new URLs also get banned, then that would be a clearer signal that the government started a direct crackdown on the FX industry. We estimate that in the latter case the government would only take a few days to “catch up” with the new URLs, so we should have an answer soon,” he elaborated.

Just a couple of months ago Bitcoin and cryptocurrency exchanges were banned by the Chinese government. After a short-lived blip, the trading volumes disappeared from the banned exchanges in China but Chinese yuan transactions declined only to mysteriously reappear in Korean won via exchanges based across the Yellow Sea.

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