Analysis: Regulators Limiting Traders Access to Trading

As previously reported, some of the world’s leading and regional regulators have chosen to limit the amount of leverage offered to retail Forex traders in their respective regions. Today it looks like CySEC in Cyprus, ASIC in Australia and the Central Bank in Russia are all due to implement their own specific restrictions.

Generally, the regulators have followed ESMA’s lead, the European regulator, in trying to determine what restrictions to put in place. Europe has adopted a rule by which all retail traders, irrespective of capital or experience are now subject to the same leverage restrictions. While other FX regulators have discussed a tiered system of leverage caps, based on the customer’s experience level (professional vs. non-professional investor) and their net worth as criteria for determining if someone is an “experienced” trader.

This debate is currently going on in Russia, where the proposal to cap leverage and access to trading has been proposed for all financial markets available to retail traders. This kind of approach may greatly limit access to trading for Russian’s as a whole.

Poland has taken a bit of a different approach in light of reports that many Polish citizens took their accounts offshore once ESMA’s universal european leverage restrictions came into play. Poland’s self-regulatory organization IDM announced a proposal to create a specific category of “experienced traders” which will include those traders who have completed a special educational course. Such traders would be able to trade at 100:1 leverage.

As such, we see that traders around the world are pushed to move to less regulated jurisdictions. It is for sure – as long as such restrictions continue to be adopted without a meaningful option for experienced or high net worth traders, the outflow of customers to offshore jurisdictions is bound to continue.

Nonetheless, protections for traders using offshore brokerages have been available for several years now in a self-regulatory capacity, with the Financial Commission offering free dispute resolution services to customers of its member firms since 2013. The mediation service has proven to be more efficient than major regulators and more robust in handling complex trading related cases. Likewise, the Commission offers a Compensation Fund for traders, helping them in receiving funds awarded through the mediation service.