There’s no denying that 2017 wasn’t the most exciting year in terms of market volatility, but we’ve still got these notable industry developments over the past twelve months.
Margin adjustments on geopolitical risks
The year was choc full of geopolitical risks, starting from Trump, North Korea, U.K. snap elections, Trump, German and French elections, Brexit negotiations, and – you guessed it – Trump.
Now brokers have learned their lesson from the SNB shocker of 2015 enough to make adjustments that would reduce their exposure to potentially wild market swings.
Because of that, a number of brokers typically announce higher margins (or lower leverage) for assets and currencies that could be vulnerable to such event risks, in keeping with similar adjustments to the likes of the U.S. election and EU referendum in the previous year.
Brokers like Saxo, FXOpen, and Invast have been quick to require higher margins from twice to up to five times the normal levels in reaction to rising tensions between the U.S. and North Korea. Other brokers in Japan have also issued warnings to clients about the risks of limit and stop orders not being filled due to sudden market movement or lack of liquidity.
Rise of MetaTrader 5
Move over, MT4! More and more retail forex brokers are switching to MT5 for its additional features previously available only for institutional traders. Read more about the differences between MT4 vs. MT5 here.
In March, XM.com included MT5 in its available trading platforms to allow clients access to more asset clases, including CFDs on indices, commodities, and even individual stocks. FXOpen transitioned to MT5 in October thanks to its support from ECN trading accounts and interbank liquidity. IC Markets, TMS Brokers, Amana Capital, and CFH Clearing were among the entities that also made the shift this year.
As Finance Magnates noted, MetaQuotes has slowly been phasing MT4 out in order to increase market penetration for their MT5 product, adding one feature after another to push for its adoption among more brokers.
GAIN Capital acquires FXCM
Early in the year, most market watchers were taken by surprise when U.S. regulators slapped a $7 million fine on FXCM for engaging in false and misleading solicitations to its clients. It was subsequently banned from future CFTC membership, along with several of its officers.
Now FXCM was the largest retail forex dealer in the U.S. as it held more than a third of the market share as of December 2016 with net revenues of around $48 million. Those U.S. accounts were then acquired by GAIN Capital Holdings and part of the freed up capital was used to pay FXCM’s debt to Leucadia Capital in the aftermath of the SNB shocker.
Brokers and banks welcome crypto trading
Last but certainly not least is the warm welcome to bitcoin and altcoin trading by a good number of forex brokers. Not much of a surprise given how forex volatility has been lower than usual while cryptocurrencies have hogged the spotlight for the most part of the year!
Online Swiss bank Swissquote was among the first to launch bitcoin trading without leverage in its partnership with Bitstamp, enabling clients to exchange dollars or euro to bitcoin simply through their trading accounts.
XM.com soon unveiled BTC/USD trading on its MT5 platform in the form of CFDs. These were launched as cash CFDs, also with zero commissions, no fees, and low margin requirements. London-based ETX Capital soon followed suit as investors continued to show increasing appetite for cryptocurrencies.
In December, ActivTrades launched CFDs on bitcoin, litecoin, and ethereum to cater to the increasing demand for altcoin offerings. This followed the launch of bitcoin futures on CBOE and CME, which led to a strong pickup in trading activity and volumes in the industry.
However, concerns regarding market manipulation and the inherent volatility of these digital assets have led some brokers like IC Markets and Think Markets to lower leverage in order to manage their exposure better.
There you have it, ladies and gents! It has been a slow and steady grind to say the least, but we did see the forex industry evolve throughout the year. Any developments I missed?