The past twelve months were pretty eventful ones, not just for forex price action itself, but also for the entire financial industry. Here’s quick rundown of the biggest news that affected forex brokers and regulation in 2015:
1. Stricter margin requirements after SNB shocker
This year was off to an exciting start, as the SNB surprise decision to scrap the EUR/CHF peg seemed to be an omen of more unprecedented events to come. Not only did this announcement spark thousands of pips in franc price action, but it also sent a nasty shockwave of losses among client accounts and broker’s balance sheets when a bunch of stops and margin calls got triggered overnight.
The SNB shocker aftermath on the forex industry was so bad that some firms were forced to declare insolvency or close shop completely, with several clients refusing to cover their negative account balances. Because of this, financial regulators proposed several changes regarding leverage limits and margin requirements, which garnered mixed reactions from forex market participants.
2. More algorithmic trading solutions
Algorithmic trading strategies continued to gain market share throughout the year, as the appeal of automated trade signals generated increased interest in forex EA coding and custom indicators. More firms jumped on this bandwagon and introduced various product solutions such as VPS hosting, visual-based customization, and back testing tools to address common concerns.
3. Tighter bitcoin regulation
Even though bitcoin had a rough time in 2014, several forex brokers still worked on adding the cryptocurrency and other related derivative products on their platforms. However, governments and regulators continued to treat bitcoin with a lot of skepticism, especially since a lot of malware and online scams involved virtual currency in ransom payments.
A number of regulatory frameworks concerning bitcoin were rolled out this year, including the infamous New York BitLicense. Even the CFTC had its say in the cryptocurrency industry, ruling that bitcoin is a commodity and that forex brokers seeking to offer these products for trading should obtain the necessary licenses first.
4. Beefed up NFA cybersecurity rules
In line with the growing number of hacking incidents involving cryptocurrencies, there were also plenty of reported cybersecurity attacks on forex brokers this year. This resulted to technical outages that prevented clients from accessing their accounts for hours or phishing emails attempting to obtain login information.
With that, the NFA decided to step up their game when it comes to protecting industry players by announcing stricter cybersecurity requirements. These include additional compliance rules such as cybersecurity education for brokers’ employees and executive-level reviews set to take effect in March next year.
5. CFTC automated trading rules?
Towards the end of this year, the CFTC acknowledged the need for oversight in the expanding algorithmic trading sphere. In November, the financial watchdog issued a notice detailing its proposed rule updates to uphold best practices for algorithm trading systems, electronic trade matching engines and new connectivity methods.
This proposal (There are 150 enumerated requests over 500 pages, mind you. Zzzz…) is still up for review and comments, so I’m gonna sit tight for now and wait for more updates next year. Based on some reactions from forex players, this could expose trade secrets for high-frequency forex strategies, which suggests that firms might not be too eager to fork over their source code for regulators to review.
Phew! There you have it, forex fellas! Do you think 2016 will shape up to be an eventful year as well or a much more exciting one?