Regulator JFSA makes Final decision on Japanese Retail Forex Leverage cap


30 May, AtoZ MarketsAccording to a number of online reports, Japanese authorities have wrapped up discussions in regards to the retail Forex leverage. Earlier this year, Japanese regulators have been discussing the opportunity to set the leverage cap at 1:10. 

Regulator JFSA makes Final decision on Japanese Retail Forex Leverage cap

As a matter of fact, following the Great Financial Crisis in 2008, Japan has adopted a minimum of 1:25 in regards to the retail Forex leverage. Yet, some months ago, regulators have considered changing this number to 1:10. 

Now, the key financial regulator in Japan, the Japanese Financial Services Agency (JFSA) has made a final decision. The agency moved to scrap the plan, according to online reports.

In order to manage the risks for traders, the JFSA is expected to implement stress tests on local brokerages in order to ensure that they have enough capital to withstand unexpected shocks. One of such events took place on 2015 when many brokers have filed for insolvency due to the floor removal from the EURCHF rate.

Japanese retail traders are used to betting against the local currency in carry trades, which implies that margin Forex trading appears as one of their key sources of income. Japanese central bank presently is working on the expansion of its balance sheet. 

European Leverage Restrictions

Following on this, Japanese regulators have adopted a slightly more considerate approach when it comes to the regulatory frameworks. For instance, some of the European watchdogs have introduced a set of strict rules in relation to the Forex trading. 

Just like that, traders that wish to use higher leverage in Europe will need to seek brokers that have regulation outside of the bloc or, alternatively, reclassify to professional investors. The latter option would significantly reduce the protection level for the retail investors. 

In fact, this last step has been a normal practice for the global regulator, however, some of the European regulations have restricted the CFDs leverage on a greater scale. 

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