More and more brokers are coming out of the woods, which means competition are tighter than ever. There are challenges that have to be conquered in order to be able to survive.

Forex industry today is in what you may call challenging condition. More and more brokers are coming out of the woods, which means competition are tighter than ever. Apart from that, technology advances, regulation tightening, and the rise of virtual currencies, are challenges that have to be conquered by those who deal in forex market in order to be able to survive.

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Downside of Financial Globalization

Earlier this year, Bloomberg reported a transcontinent forex trading scandal that triggered inquiries into big banks in Wall Street, UK, and Europe, including Goldman Sachs, Citigroup, and Barclays. They are suspected of collectively manipulating WM/Reuters rates. WM/Reuters has been used as exchange rates benchmark for trillions of dollars investments a day. The breach of law occured in spot market and estimated to have taken place for at least a decade. Financial authorities in the US, UK, and Europe immediately started probing into the case. Until this article written, investigations are still ongoing.

For some time, forex investments and trading via banks have been unattractive, and so this scandal may slam it further. Bloomberg quoted consultancy group Aite Group LLC, mentioned that electronic transaction encompassed 20% forex trading in 2001, increased to 66% in 2013, and is predicted to hold 81% spot forex trading in 2018. Previously, electronic transaction was unable to handle bigger values and considered relatively unreliable. However, along with technology advances, forex trading via internet became more preferable. In addition, there are pressures from regulators in Europe to shift forex transaction from banks to exchanges.

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Regulation Tightened, Marketing Shifts to Asia

Regulation for the other kind of forex dealer, that is online forex brokers, are being tightened too. At least three regulators, Cyprus CySEC, US NFA, and Australian ASIC, amended their regulation and are planning to monitor more closely. Other regulators who are commonly thought of less bonafide, also did not hesitate to revoke licenses from problematic brokers.

On one hand, this trend provides extra security blanket for retail forex traders, particularly in light of the recent suspected scam of 4XP. Leaprate have reported that some 4XP clients experienced troublesome withdrawals and 4XP itself embroiled in a bit dispute about its licenses with authorities in British Virgin Island and Russia. On the other hand, more regulations mean that brokers activities are more restricted.

While market in the West undergo slimming exercises, forex brokers target Asia as the next expansion field. Bart Burggraaf of MediaGroup in his column in Forexmagnates mentioned that although there are still opportunities in the West, Asian market also has many advantages for brokers. Advert and personnel costs are lower, whereas target audience are larger. However, there are few experienced traders in Asia, thus forex education is needed.

 

Controversial Innovations

Alas, forex education provided by brokers generally limited to conventional trading, and not yet covers latest developments such as Bitcoin and Binary Options. Asian retail traders tend to distance themselves from such new innovation because of the lack of knowledge on the topic. For those who are religious-minded, binary options are especially seen with suspicion. Public opinion on binary options are that it is extremely risky business. Some even liken it to gambling.

But it is still early days. As more brokers offer facilities related to bitcoin and binary options, we may hope that more guidance will be provided for Asian traders. In short, forex industry now experiences various challenges to keep up with the trend, maintaining good reputation and client's trust, as well as improving the quality of customer services. In traders' part, it is also important to be extra careful not to step on any kind of scam and widen own knowledge in order to survive the market.