The head of the financial regulatory in Australia has confirmed that his organization has made it harder for brokers to get a license in the country, especially for those who wish to use Australia for a base of operations for the Asia-Pacific market.
Speaking at a parliamentary hearing on Friday, the Chairman of the Australian Securities and Investments Commission (ASIC), Greg Medcraft, said his jurisdiction is being “picked off” by online forex brokers looking to offer excessive leverage.
Mr. Medcraft said that Australia’s top financial regulation forum, which includes ASIC, the Reserve Bank, Treasury and the Australian Prudential Regulation Authority, has already discussed what they see as a problem and how to deal with it.
“We’re doing what we can in terms of vetting those who apply for licences in this area, particularly those that don’t have a connection with Australia that are operating outside of Australia. It is an issue that’s been discussed recently at the Council of Financial Regulators.”
Additionally, at the parliamentary hearing, when asked if retail forex traders were sophisticated enough to understand the risk, fellow ASIC Commissioner Cathie Armour said there was an “open issue” whether Australia should go the way of Japan and the U.S by strictly limiting the maximum leverage brokers may offer.
Australia has long been a regional hub for brokers looking to target the Asian-Pacific market. The country’s reputation as a regulated market, its proximity to large Asian nations such as Japan, and a large Chinese speaking immigrant community made it a convenient jurisdiction for a license and operation.
However, the regulatory environment has recently become inhospitable for new brokers. In the latest iFX EXPO Asia in Hong Kong, at the Best Customer Acquisition Tactics Panel, it was revealed that the regulators are demanding to see if a broker is truly Australian. Paul Derham, a partner at Holley Nethercote Commercial & Financial Services Lawyers, said that ASIC requires brokers to prove that the majority of their clients are Australians in order to keep their license.
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