By Oz Golan, Tradency.
From August 1st all Forex brokers in Japan will be required to reduce their trading leverage to 1:50 by the FSA Japan (Financial Service Agency). The First effect will be on the retail users who will need to deposit more funds in order to trade the same positions they are holding. If they do not increase their funds, volumes are going to decrease and Brokers incomes will reduce accordingly. I speculate that these market conditions may create a financial challenges for Japanese Brokers, especially the mid – small size brokers who will not have enough capital to continue their marketing efforts to recruit new clients.
The Japanese market is the most evolved Forex market in the world that benefits from a huge popularity among the retail users which generate higher client value than in other countries in the world. Opportunities are waiting for big Brokers who have enough capital. In the past we were witness some moves from the non Japanese Brokers acquiring local brokers, Saxo Bank acquired Astmax FX and established an FSA license, Forex.com acquired the mid size Broker Fx-Arena and FXCM already have a foothold in the Japanese market. This is a good opportunity for larger non-Japan brokers to penetrate in to this rewarding market, since they are able to start with an existing client base and most important to get the FSA regulation immediately without applying for it. This could also be a good opportunity for the bigger brokers in Japan such as Gaitama, Central Tanshi, Money Partners Himwari, and Cyber Fx (http://www.yano.co.jp/press/pdf/639.pdf) to base their dominance in the market by picking up the struggling mid size brokers.
Those who will survive the regulations effects will look for new ways to generate more volumes without allowing high leverage trading. I assume that we will see more variety for driving volume products and trading platforms being offered to the users.
Or things could play out there as they have in the US, where an overzealous gov’t agency thinks they can regulate a global commoditized marketplace. Is there anything preventing Japanese citizens from wiring their balances to the UK and avoiding the leverage cap?