The effects of regulators and central banks have always played a pivotal role in the international currency market but from time to time they also take specific actions that impact brokers specifically. Over the past week we have seen a number of developments directly related to regulations in online trading in Australia, Cyprus and Russia. Other top stories during the week involved a broker reaching out to the Chinese market as well as a major rally in FXCM stock price.
Limiting Your Options
On Monday, the Cyprus Securities and Exchange Commission (CySEC) sent out a letter to investment firms under its jurisdiction with proposed changes to the regulatory framework. Among the new legal practices that CySEC says are intended to help binary options traders, there are some that the industry might find hard to swallow.
Increasing transparency for traders, Cypriot brokers will be required to provide identification of the assets, forex style bid and ask prices and an “adequate explanation” of the expiry price and the methodology used to determine it. However, other measures will limit the possible range of regulated binary options rather than focus on transparency.
First Russian Licence
On Tuesday, we reported that the Russian central bank granted the first license application in half of the time stated under the Russian forex regulation law. The first Russian brokerage allowed to operate in the country as a foreign exchange dealer under the new regulatory framework is Finam Forex (ФИНАМ ФОРЕКС).
The brokerage is part of a major privately owned financial group, Finam Holdings. The firm was founded over 20 years ago and is one of the first financial intermediaries in modern Russia.
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Last Line of Defence
On Wednesday, we offered an in-depth analysis along with full figures of what will happen if a major Cypriot regulated broker goes under. With €17.5 million in the pot, the Cypriot Investors Compensation Fund is the last resort for traders of insolvent firms.
The fund has several ways to make up the difference but ultimately the cost is paid by brokers. The story caused a number of readers to raise questions about the issue from a critical perspective and a lively debate ensued.
ASIC’s Watchful Eye
On Thursday, the Australian Securities and Investments Commission (ASIC) notified the public that IronFX was forced to remove online marketing statements and change a disclosure document that suggested certain financial services were regulated in Australia, which ASIC determined was not the case.
The watchdog also warned that investors should ensure that they understand their contractual rights and obligations and carefully assess all relevant risks. In particular, investors should understand the credit risk posed by the hedging arrangement with IronFX Cyprus before entering into any transactions with IronFX Australia.
On Friday, we reported that FXTM, one of the long-running Cyprus based brokers, has launched a new deposit option for clients that are residing in China. The Alipay online wallet, which has a popularity in China similar to that of PayPal in the U.S. and Western Europe, is now available as a deposit option for clients of the brokerage.
The brokerage states that clients will be able to fund their accounts instantly through Alipay, which is owned by the Chinese tech giant Alibaba. In addition, the brokerage has committed to refunding the transaction fee that is paid by its customers.