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Tier-1 retail FX brokers use regulation as an edge against smaller competitors

Aite Group sees brokers introduce new retail FX products and use regulatory changes to remain competitive

Boston, July 17, 2013 – Research from Aite Group shows that key parts of the global retail FX and contract-for-difference (CFD) markets, where local brokers hold dominant positions and regulations require domestic registration, are likely to remain off-limits to foreign firms. Yet, the race among brokers looking for international markets is intensifying as retail FX global trading volume is in record territory (US$410 billion as of 1H 2013), propelled in large measure by the strong performance of Japanese retail FX brokers so far this year.


This latest research, which follows a recent Aite Group study of 253 retail FX/CFD brokers worldwide, shows that most Tier-1 brokers (60%) are highly regulated and as a group have developed an edge against smaller competitors by expanding their product offerings beyond FX and CFDs into options, stocks, and futures. In so doing, these large brokers are catering to sophisticated active traders and getting larger as a result.

“Domestic regulations are effectively closing key markets to unregulated brokers, and there is a high correlation between a firm’s retail FX trading volume and its regulatory profile,” says Javier Paz, senior analyst in wealth management at Aite Group. Paz further advises that “brokers would do well to reprioritize capital spending into regulatory compliance and product development areas as well as raising more capital to realize the significant transformation needed to remain competitive.”


Aite Group's wealth management clients can download the report here.


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