Retail Foreign Exchange Trading - FX.GOLD. アウトプット報告

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Retail Foreign Exchange Trading

Retail foreign exchange trading is a small part of the larger foreign exchange market where individuals speculate on exchange rates between different currencies.

This segment has grown with electronic trading platforms and the rise of the internet, allowing individuals access to global currency markets.

As of 2016, it was reported that retail foreign exchange trading represented 5.5% of the entire foreign exchange market, amounting to $282 billion in daily trading turnover.

Before the development of forex trading platforms in the late 1990s, forex trading was restricted to large financial institutions only.

The growth of retail trading began with the rise of the internet, trading software, and forex brokers allowing trading on margin.

Today, individuals can trade spot currencies on margin with market makers.

This means they only need to put down a small percentage of the trade size and can buy and sell currencies within seconds.

Regulation

Starting in 2010, financial regulators in developed markets introduced measures to limit the amount of leverage that retail investors can use, particularly in foreign exchange transactions.

These restrictions aimed to limit speculation and protect retail investors from unexpected losses.

United States

In the United States, the Commodity Futures Trading Commission (CFTC) limited leverage available to retail forex traders to 50:1 on major currency pairs and 20:1 for all others.

Major currencies include the Australian dollar, British pound, Canadian dollar, Danish krone, euro, Japanese yen, New Zealand dollar, Norwegian krone, Swedish krona, Swiss franc, and US dollar.

The National Futures Association (NFA) is authorized to periodically review the list of major currencies in light of changes in volatility.

The initial version of the CFTC's 2010 regulations proposed lowering leverage limits to 10:1. However, the CFTC adopted the higher 50:1 and 20:1 leverage limits following criticism from Forex market participants. No such restrictions existed before 2010, when these rules came into effect.

European Union

In Europe, the European Securities and Markets Authority (ESMA) capped the amount of leverage that brokers and CFD providers could offer retail investors.

These limits, which came into effect in 2018, vary between 30:1 and just 2:1, depending on the asset class. More volatile asset classes, like cryptocurrencies, tend to attract lower limits.

ESMA's limits on leverage are as follows:

・30:1 for major currency pairs;

・20:1 for non-major currency pairs, gold, and major equity indices;

・10:1 for commodities other than gold and non-major equity indices;

・5:1 for individual equities and other reference values;

・2:1 for cryptocurrencies.

ESMA's major currency pairs comprise any two of the following currencies: the US dollar, euro, Japanese yen, pound sterling, Canadian dollar, or Swiss franc. All other currencies are considered non-major.

ESMA's major indices include the following equity indices: FTSE 100, CAC 40, DAX 30, DJIA, S&P 500, NASDAQ, NASDAQ 100, Nikkei 225, ASX 200, and EURO STOXX 50. All other indices are considered non-major.

United Kingdom

The UK's Financial Conduct Authority (FCA) followed ESMA's restrictions on leverage in 2019. This means that ESMA's measures outlined above became part of UK domestic law when the UK left the EU. These measures remain in place to this day.

Japan

In Japan, the Financial Services Agency (FSA) restricted leverage available to retail traders across foreign exchange transactions as early as 2010.

Maximum leverage was capped at 50:1 in August 2010 and was subsequently reduced to 25:1 in August 2011. In the early 2000s, Japanese housewives, collectively called "Mrs. Watanabe," began trading currencies to improve their financial situation.

Australia

In Australia, the Australian Securities & Investments Commission (ASIC) introduced a product intervention order in March 2021 that included leverage limits brokers and CFD providers could offer retail investors.

This included limiting currency leverage to a maximum of 30:1.

Fraud

Main article: Foreign exchange fraud

Retail forex trading has been promoted by some as an easy way to make profits and has thus been the focus of several foreign exchange frauds.

In response, financial regulators in various countries have introduced restrictions or provided warnings about this type of trading and have taken legal actions against perpetrators.

However, due to the decentralized nature of currency trading and the easy global access to the internet, many brokers are based in less restrictive jurisdictions.

See also

・Broker

・Day trader

・Scalping

・Category: Foreign exchange companies

References

1. Triennial Central Bank Survey (April 2016), Bank for International Settlements

2. Waters, Betsy (August 14, 2008). "The Rise of Retail Foreign Exchange". TradingMarkets.com. The Connors Group, Inc. Retrieved June 14, 2013.

3. "Final Rule Regarding Retail Foreign Exchange Transactions" (PDF). cftc.gov.

4. "European Securities and Markets Authority Decision (EU) 2018/1636". eur-lex.europa.eu.

5. "ESMA FAQs" (PDF). www.esma.europa.eu. Retrieved September 13, 2022.

6. "FCA statement on onshoring ESMA's temporary intervention measures on retail CFD and binary options products". www.fca.org.uk. February 20, 2019. Retrieved September 13, 2022.

7. "Margin Regulations". www.ffaj.or.jp. Retrieved September 13, 2022.

8."Authorities drop a massive bomb on CFDs in Australia, limiting how they are sold andexecuted". Finance Feeds. October 23, 2020.

9. Karmin, Craig (2008-01-12). "How a Money Trader went Bad; Bets on CurrencyPrices Become 'Fraud du Jour' Amid Regulatory Holes". The Wall Street Journal.Dow Jones and Company. p. B1. Retrieved January 12, 2008.

10. "COMMODITY SOFTWARE VENDOR CHARGED WITH VIOLATING CFTC ORDER" CTFC.gov. Retrieved December 13, 2013.

External links

・US Commodity Futures Trading Commission Forex Fraud Advisory

・Forex Resources at Curlie