Investigation: Is Australia still a viable place for FX, and why did ASIC start clamping down? We take a very detailed look

Five years ago, Australia rose to prominence as a jurisdiction of many attractive facets for the retail FX industry. A first class business culture, thriving national economy, increasingly prudent and well structured regulations for electronic trading firms, and perhaps most importantly, close trade ties with the FX industry’s golden egg: China and the Asia Pacific […]

Five years ago, Australia rose to prominence as a jurisdiction of many attractive facets for the retail FX industry.

A first class business culture, thriving national economy, increasingly prudent and well structured regulations for electronic trading firms, and perhaps most importantly, close trade ties with the FX industry’s golden egg: China and the Asia Pacific region.

Here in Hong Kong today, in the first of a series of investigative reports from across the Far East this week, FinanceFeeds CEO Andrew Saks-McLeod takes a look at whether Australia is still a viable option, and what the ups and downs have been over recent times.

Speaking to regional expert David Batten, several important aspects are revealed here.

AU used to be a place where a $30,000 license could fetch you as much as $250,000 in cash due to demand and desire for incoming firms not to wait out the application process. Is this the case nowadays?

You are correct in that it would cost someone AUD$30K to get a license from ASIC, but you could buy a working one for around $50 to 60K off someone. (I sold one for $55K in Dec 2013). But that was around the time GTL stole over $3 Million dollars from a guy, Mahmood Riaz, that ASIC had been warned was wanted by Euro regulators for allegedly stealing 350 Million euros from clients. ASIC’s reply was that he was never convicted and so confirmed to their good fame and character test.

It appears that after the GTL Trading episode, ASIC clamped down very harshly. What was the feeling on the ground? It became very clear that all license applications were stopped dead in their tracks by ASIC with rumors that some were taking more than a year to process, whilst other financial services business in other sectors were being processed without delay

And that is when it all turned pear shaped. ASIC, who even to this day do not understand the industry they are regulating, deemed that they wanted all retail market making licenses for FX and derivatives OFF the streets. Note here that ASIC law defines margin Forex as derivatives and NOT Foreign Exchange. SO that shows the depths of their understanding.

To cleanse the industry ASIC literally stopped granting these market making licenses. They made up bogus excuses in order to NOT grant all licenses.

They would use stalling tactics to drive foreign investors away and ask many irrelevant questions over and over again.

Some ASIC analysts even spoke on the phone to industry participants acknowledging the unofficial policy, although ASIC are adamant that no such policy exists. However NOBODY in the industry knows of anyone who has been granted a license since January 1 2014.

Such a strong license in ASIC which was traditionally viewed as a replacement for NFA licenses when it became expensive and retail FX firms exited the market, is now viewed less than an FCA license from the UK or CySEC which is obviously very popular. Where to now for AU and ASIC? Bright future?

Without any new licenses being granted, a black market for AFSL’s has appeared with prices increasing exponentially up to the AUD$1 Million mark for a clean retail market making derivatives license. Which is MADNESS.

Although most of ASIC’s rulings are incorrect and wrong, the only avenue for appeal is through the Arbitration Tribunal known as the AAT.

This course is rarely taken as it costs in excess of AUD $30,000 and takes up to 12 months to get to court. (FYI I am taking ASIC to the AAT for exactly this refusal to grant me a license on stupid incorrect grounds. The hearing is November 23rd and 24th. I will let you know how I go).

What are the main benefits to having an AFSL (Australian Financial Serivces License) from a client’s perspective? What would you tell a client are the main benefits, that was considering working with and AFSL company in Australia?

This outcome of limiting AFSL’s on the street has only hampered foreign investors looking to get an ASIC license. The market in Australia has been mined and picked over, and very few new clients are available.

“Hence the focus for any new AFSL is Asia. So with a $1 million price tag, investors are looking elsewhere” – David Batten

I have even been told that a prospective AFSL buyer was scared off the $1 Million price and bought a Belize license that is not worth the paper it is written on. But a crap license is better than a $1 million license.

We have heard that Australian clients can often be viewed as high maintenance considering that the protections in place as well as the level of investor knowledge in Australia being high. Are Australian retail customers still being targeted by local brokers or are the brokers focusing on international markets?

It will get worse as ASIC are attempting to bring n mandatory trade analysing, with every FX broker soon to pay $1 per trade to send to a third party firm who will record and monitor each and every trade in Australia.

Its designed to stop money laundering. It will kill the industry except for the very big players. These big players are rumoured to have convinced ASIC they can regulate themselves, which seems ridiculous and grossly unfair.

Read this next

Uncategorized

Moscow Exchange reports $350 billion in November FX volumes

FX trading volumes continued its upward momentum at Moscow Exchange (MOEX) during November, buoyed by a steady rise in volatility coupled with a multi-year effort to bring new business to the platform.

Retail FX

Interactive Brokers’ volumes continue growth trajectory in November

Interactive Brokers LLC (NASDAQ:IBKR) has announced higher trading volumes in November, dwarfing the metrics for October and the same period last year by 20 percent.

Retail FX

Exness trading volume hits record highs for second consecutive ‎month

FX broker Exness’ trading volumes have breached new highs in November, building on the record-breaking turnover streak from the beginning of the fourth quarter. That has been aided by the economic impact from the Covid-19 developments and inflation concerns that apparently sent investors hunting for FX instruments to limit their risk exposure.

Institutional FX

Hedge-fund legend Steven Cohen invests in Dmitri Galinov’s 24 Exchange

24 Exchange, the OTC platform backed by Fastmatch founder Dmitri Galinov, has completed a fresh fundraising round of $14.25 million at an undisclosed valuation. The recent capital injection was led by Point72 Ventures, the venture capital firm of the hedge fund titan Steven Cohen.

Digital Assets

Can Coinbase make or break XRP? – (Congress, XRP rating, JP Morgan)

According to Coinbase’s Council, XRP has the highest rating among 28 cryptos – meaning it is the closest you can get to a security: 4 out of 5.

Digital Assets

Polygon (MATIC) delves deeper into blockchain gaming by partnering with GameOn

Polygon, the Layer 2 scaling solution for Ethereum, has announced a partnership with GameOn Entertainment to build new and different types of NFT games on the network as it seeks to expand into the blockchain gaming and NFT space in a major way.

Retail FX

David Beckham to promote GemForex across Asia

GemForex makes efforts to lead in trading conditions, execution times, safety of client funds and data security, according to the FX and CFD broker holding a Mauritius Financial License.

Retail FX

InstaForex extends sponsorship deal with Borussia Dortmund after German Cup win

InstaForex provides access to trading of forex, CFDs, stocks, futures, options, and cryptocurrencies as the FX industry goes multi asset to address the needs of an increasingly demanding client base. 

Digital Assets

Treasury Secretary Yellen still cant decide on digital dollar

Treasury Secretary of the US, Janet Yellen, has said that she still is not sure whether the US should go ahead and have the digital dollar and follow the example of other major countries including China and India in introducing the same.

<