Regulation and tax implications on OTC vs. Exchange FX trading in Japan

We’ve gone ahead and compiled a study about how the OTC and exchange (click365) forex trading volumes compare in Japan

We’ve gone ahead and compiled a study about how the OTC and exchange (click365) forex trading volumes compare in Japan and how they are affected by leverage caps and tax changes.

In August 2010 the max leverage was capped at x50 and in August 2011 it was reduced further to x25 max. The effect on OTC volumes was very strong and they dropped considerably, never being able to rebound since. The effect on exchange volumes was similar – volumes stagnated or dropped (more so in 2011) however their portion of the total traded volume actually increased.

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Up until 2012 OTC forex trading was taxed at 50% while exchange forex trading was taxed at 20%. Since January 2012 the tax is the same: 20%, this has had an adverse affect on exchange trading volumes.

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First interesting period is between August 2010 and August 2011 – you can see the exchange volume growing while the OTC one is dropping. The second period to notice is 2012 (and few months preceding it) where the exchange volumes start dropping due to the tax change while OTC are back climbing (even if modestly).

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