Australia's ASIC and UK's FCA look to regulate copy trading

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Those who make money by having retail traders copy or mirror their trades will need to be licensed.

ASIC, FCA, copytrading, mirror trading, regulation, PAMM regulation, auto trading regulation, Australia, forex newsLeapRate Exclusive... LeapRate has learned that two of the world's leading financial regulators, certainly when it comes to forex regulation -- ASIC in Australia and the FCA in the UK -- are in the advanced planning stages of regulating the practice of copy trading / auto trading / mirror trading.

While still not finalized in either instance, it appears as if both ASIC and the FCA will require anyone directing the investing and trading of client money, such as copy and mirror trade leaders as well as PAMM managers, to have an appropriate money managers' license, whether or not they actually hold client funds.

In ASIC's case, in a post they made yesterday on the topic of high frequency trading and dark liquidity (large anonymous trades done away from an exchange), ASIC made a side note that "it will "release guidance on automated trading and market manipulation in coming months". ASIC has already held discussions with certain industry participants in Australia as it prepares its final guidelines for auto and copy trading.

In Europe, the FCA is looking at a pan-European ESMA rule which is already on the books but which is not enforced, which states that mirror-trading falls within the parameters of MiFID regulated portfolio management. What this means is that trade 'leaders', and PAMM managers, will need to hold an investment manager license if they direct the trades of retail forex traders. We reported yesterday that newly-launched trader education and trade leader rating company TradeSlide spent a year to receive their investment manager license from the FCA, in anticipation of the enforcement of these rules.

We will continue to follow this story as it develops. Stay tuned to LeapRate...

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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  • Guest Tuesday, 20 August 2013

    No problem

    Well, this shouldnt be a problem - "Trade Leaders" makes tons of money since they are profitable professional traders, they can afford a license, most probably already have a license in place - right :)

  • Gerald Segal Thursday, 22 August 2013

    RE:No problem

    Mr. Mystery Guest -- what a rule like this does is create a large barrier-to-entry for new up-and-coming trade leaders. And a number of the trade leader / FX social networks are predicated on enticing traders to join so that they can prove their worth and become trade leaders. This places a large obstacle in the way of anyone who wants to become a 'trade leader'.

  • Duncan Saturday, 12 April 2014

    Do your research

    This type of thing already needs a licence in Australia

    Meaning of financial product advice
    (1) For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that:
    (a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or
    (b) could reasonably be regarded as being intended to have such an influence.

    Pretty sure telling someone how to trade could reasonably be regarded as influencing their decision.

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Guest Monday, 21 April 2014

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