ASIC Restricts Brokers from Signing Japanese TradersBy Lex Yaranu | Thursday, August 20th, 2015
In what seems to be a move at protectionism and plugging any leaks in the system, the Australian Securities and Exchange Commission (ASIC) has at the request of Japanese regulator JFSA, withdrawn its support for non-Australian traders on binary options platforms.
In essence, Japanese binary options brokers who trade with Australian firms will not be covered by ASIC in cases where there is broker misconduct of any kind.
This is in response to the Japanese Financial Service Authority’s decision to curtail the trading of binary options in Australia by Japanese citizens, a situation which is similar to the stance of the Commodities and Futures Trading Commission (CFTC) in the USA which currently prohibits foreign firms from holding binary options accounts for US citizens, or conducting any kind of marketing activity to US citizens, citing the non-exchange traded nature of overseas binary options.
Under the CFTC arrangement, any company wishing to do business with US citizens would have to open an office in the US, register with the appropriate authorities and create trading platforms that offer regulated assets listed on the US markets. A similar situation is playing out now with the JFSA decision, as it has also placed lots of restrictions on traditional European-style binary options. Use of bonuses is restricted, and short term options are banned.
OUTCOME OF THE DECISION
Japan’s financial markets are extremely well developed and there is a large number of informed traders among the general population. The market size is therefore huge and when the JFSA started to curtail the leverage provision for forex trading, many traders jumped to the nearest regulated jurisdiction which was Australia, leading to a surge in revenue for Australian brokerages. Companies like Vantage FX which offered binary options as an MT4 plug-in reported steep increases in volume of trade and revenues.
It is possible that the JFSA now wants this money to stay in Japan. Their decision will therefore work in two ways:
a) Japanese traders will have to repatriate their funds back home. This will bring more tax scrutiny and also boost the economy via increased tax revenue and increased consumer spending.
b) Foreign firms seeking to profit from the large customer base in Japan will have to come to Japan to open shop. Again, this brings more foreign exchange into Japan and provides for a broader base of taxation in the financial services industry.
We wait to see how this move plays out in Q3 and Q4 2015 as well as the future.Published in News & Analysis