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Are Australian Forex brokers in Europe under more scrutiny?

Redwan Eid | Mar. 19, 2019
Are Australian Forex brokers in Europe under more scrutiny?

March 19, 2019, | AtoZ Markets - The Australian Securities and Investments Commission (ASIC) issued a Forex brokerage licence after a two-year gap, amid talks about intentions the regulator has for watching the Australian Forex brokers in Europe as well.

ASIC has just issued the first retail forex brokerage licence after a long while relatively, to a Forex brokerage firm called Fortrade, as the media say. The long pause the regulator has taken up until now is worth consideration. Why is it that the ASIC Forex brokerage license application became so difficult? Was it that ASIC did not really find what satisfies it among all the applications submitted for licences over the last two years really? To answer this question, we need to flash back to ASIC history and the colour it dyed itself with.

ASIC Forex brokerage license applications in figures

The Australian Securities and Investments Commission (ASIC) is an independent Australian government body that acts as Australia's corporate regulator and and was established on 1 July 1998. ASIC's role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors. A recent report showed that in 2017 until 2018, the Australian regulator considered 1,728 ASIC Forex brokerage license applications; whilst only 758 were approved, which is a 44% success rate. This again confirms the reputable ASIC license in the Forex market, as the regulator is very strict on its proceedings and complaince. 

Furthermore, the ASIC report indicated that on average the AFSL application takes more than 150 days. The data showed that between 2017 until 2018, 74% of the submitted ASIC Forex brokerage license applications were finalised within 150 days, while 88% of applications were finalised in 240 days. Thus, the amount of time depends on the complexity of the business structure, thus, requiring considerable additional work.

ASIC keeps an extra eye on Australian Forex brokers in Europe

In the Forex trading field, it is very likely that fraud takes place in the light of traders who get involved in the business before getting educated enough and well-acquainted about Forex trading. With that being said, financial regulators in general play the defence in the game between both parties- the broker and the trader. Like the recent case of a Sydney based Forex broker, where ASIC suspended the license of Halifax.

As known of it, ASIC has always had a firm grip over its Forex market in Australia, where a broker needs to be fully meet the conidtions for passing the ASIC barrier and start in the market. Yet, with the recent regulatory restrictions by ESMA, ASIC matches that at the other end, keeping an extra eye on Australian Forex brokers in Europe which have multiple licenses, including the Australian Financial Services License (AFSL).      

One-stance Forex regulatory framework in the world

The unconfirmed news yet say that financial regulators today, especially those under which the Forex trade regulation fall, are in talks with each other, toward forming a unified framework with one look, for how to monitor Forex brokers wherever they operate, in collaboration with both regulators at a time: the one that is charge in the country of which the broker is national, and the regulator in charge in the country that broker operates in.

With that being said, the ASIC is also expected to comply and adapt to the global regulatory trends. The global push for a synchronized financial regulatory framework was presented as a necessity after the global financial crisis of 2008 took place.

Aussie Parliament gives ASIC more intervention powers 

In follow up to that, the Australian parliament is currently discussing a bill which is set to grant product intervention powers to the ASIC, the step that comes after the regulator changed client money rules in 2018. Plus or minus, regulators in general do not happen to take the exact same stance towards regulating the Forex trading business.

ESMA for instance, even though it keeps toughening its grip over the Forex market in the EU more and more, with extending its ban on the binary options every three months so far since the last summer, however, it does not seem to restrict the European clients to only opening accounts with local firms only within the EU. Should there be a unified regulatory framework that gathers financial regulators on one table, where forex brokers in Europe and other places fall under, we will bring it here to discuss together.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.