Japanese Forex Brokers

Japanese Forex Brokers, Rules and Regulations

JapanWhen it comes to forex brokers, Japan is a major player. Forex trading goes on in three major time hubs: the Asian zone, the London zone and the New York zone. Tokyo is widely adjudged to be the capital of the Asian forex trading zone, so it is not surprising that the majority of trade volume in spot forex in the Asian region originates from Japan. The Japanese retail forex industry is regulated by the Japanese Financial Services Agency (JFSA).

The issue of regulation has been one which has caught the eye of investors because of the sheer volume of money that passes through the retail and institutional forex platforms on a daily basis. Japan was hit in the 1990s by a series of high profile bank collapses, and this dark cloud still hangs in the background as traders ply their business in Japan. The JFSA is mindful of this fact and that is why this body has continued to apply supervision to the forex brokers in the market.

The JFSA responds to the dynamics of the market by applying a set of rules and regulations, constantly tweaking them to reflect the realities on the ground. We will now examine the set of rules that govern spot forex trading as is put out by the JFSA.

Best Forex Brokers that Accept Japanese Traders:

Rank
Broker
Special Offer
Min Deposit
Spreads From
Rating
Max Leverage
Regulations
Support
Start Trading
1
No commissions
$50
0.8 PIPs
30:1
CIMA, NFA, CFTC, FCA, IIROC, ASIC, FFA Japan, MAS, SFC of Hong Kong
Forex trading involves significant risk of loss and is not suitable for all investors.
1
Spreads From 0.8 PIPs
Max Leverage 30:1
Min Deposit $50
Register now
2
Lifetime demo account
$250
0.1 PIPs
30:1
CFTC
2
Spreads From 0.1 PIPs
Max Leverage 30:1
Min Deposit $250
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3
EUR/USD from 0.5 pips
$200
0.5 PIPs
30:1
FCA, CySEC, ASIC, AMF
3
Spreads From 0.5 PIPs
Max Leverage 30:1
Min Deposit $200
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4
0.01 minimum lot
$10
1.2 PIPs
500:1
4
Spreads From 1.2 PIPs
Max Leverage 500:1
Min Deposit $10
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Rules and Regulations of Forex Brokerage in Japan

The recent events out of Europe where the SNB abandoned its three and a half year old EURCHF peg, have shaken up the forex markets. The SNB had declared on September 6, 2011 that it would buy massive amounts of Euro in exchange for Swiss Francs to keep the exchange rate of the EURCHF at 1.2000. The SNB also promised to defend the peg relentlessly. This promise gave traders a lot of hope that come what may, the peg would hold, prompting traders to set long orders on the EURCHF at 1.2000. On January 15, 2015, faced with increasing costs of maintaining this peg and the impending onset of the ECB’s quantitative easing program, the peg was abandoned and the floor literally fell off the bucket as the EURCHF lost close to 3,000 pips in a matter of seconds. The excessive slippage which followed caused stops to be taken out and traders and brokers alike, especially brokers who offered leverage as high as 1:500 on positions, lost large amounts of money. A few brokers went insolvent while others suffered losses to varying degrees.

This situation has caused regulators to begin to have a rethink on the leverage and margin requirements brokers can offer their traders in the financial markets, as well as other aspects of spot FX trading.

1. Leverage Offering

The JFSA had in a preemptive action a few years back, reigned in the amount of leverage that brokers can offer clients.

2. Closing the door to offshore brokers

The JFSA seems to be aiming to copy the US example of preventing offshore brokers from soliciting Japanese clients. The problem seems a bit complex as it would seem from available data that Japanese clients actually go seeking for offshore brokerages in order to get reduced margin and higher leverage requirements. In order to solve the problem, the JFSA is now seeking to collaborate with regulators in other jurisdictions such as Australia to implement a policy of making sure that offshore brokers do not solicit Japanese clients. Presently, ASIC now collaborates with the JFSA to ensure Australian FX brokers do not accept Japanese clients.

3. Offshore brokers to establish local branches and obtain licensing for these branches

Subsequent to (b) above, the JFSA is making a push to get offshore brokers who are interested in rendering FX brokerage services to Japanese clients to establish branches in Japan and obtain licensing from the JFSA for such branches. This will enable the JFSA to exert full regulatory function on these branches.

State of Forex Regulation in Japan

Presently, the two main brokerages that are licensed as Japanese forex brokers are:

  1. GMO Click
  2. DMM Securities

These two firms are homegrown forex brokers and dominate the market space in Japan with trade volumes exceeding $1trillion.

What is the attitude of Japanese traders to all this? Obviously in an atmosphere where Japanese traders are not only restricted to local brokerages but also need a lot more money to trade because of reduced leverage and increased margin requirements, resentment to the JFSA’s actions is the order of the day. Some traders feel that the JFSA has been lobbied by Japanese forex brokers to churn out rules which give more business to the brokers but less options to traders.

The introducing brokerage business in Japan has also been affected adversely. Offshore brokerages relied on Japanese based introducing brokers to give them access to this market. With offshore brokers not cut off from this market, the business of introducing brokerage is dying a natural death in Japan.

The Future of Regulation as it Affects Forex in Japan

Japanese forex regulator JFSA is now reaching out to regulators in other areas to get them to ban their regulated brokers from soliciting Japanese clients. Australian regulator ASIC has implemented the ruling, since ASIC itself has already moved in this direction as regards Australian forex traders. JFSA has also contacted CySEC, the regulator in Cyprus which hosts a large percentage of forex brokers, asking it to stop CySEC forex brokers from soliciting Japanese clients. CySEC is yet to make an official declaration in this regard.

Japanese forex traders as well as introducing brokers have voiced their unhappiness with the situation , since they are faced with declining choices and a business model that looks set to die out. Will there be court battles to challenge this action? Will other regulators pull the plug on overseas soliciting? Are we heading for a situation where traders in Europe, Asia and America can only trade with local brokers? Will some brokerages with Japanese clients close such accounts or will they ignore any rulings to do so?

These are questions whose answers will be revealed as 2015 marches into the 2nd quarter.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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