With the ability for fund managers, FX firms and IBs to passport funds between Australia and its Asia-Pacific neighbors, Australia could become the world’s bridge to the most lucrative regions
Australia is widely regarded as a highly valuable region from which Western firms can do business with the coveted Far East.
The seizmic shift in interest from the Western hemisphere to the Asia Pacific as a region of global interest for FX firms has proven to be a boon for Australia’s financial markets economy, which is highly well-organized, stable and benefits from one of the world’s most respected regulatory authorities, so much so that the Australian Securities and Investments Commission (ASIC) has recently released a consultation paper which addresses the possibility of entering into a funds passport policy with its Asian trade partners.
The Asia Region Funds Passport will be considered jointly with government agencies from Korea, New Zealand, Singapore, Thailand, and the Philippines, and if implemented could result in ease of business between some of the most important regions in the FX industry.
Singapore is the largest institutional FX center in Asia, and whilst Australia’s domestic market landscape is largely retail firms which actively seek an Asia-Pacific client base, the proximity could bode well for astute Australian trading desks with a view to conducting business within Singapore’s largely bank-based FX firms, or execute FX transactions on Asian exchanges.
Indeed, this could spur institutional firms to set up in Australia, especially when the remainder of the Western world’s governmental authorities are casting a shadow over the legitimacy of dark liquidity and high-frequency algorithmic trading – a practice which is welcomed in Australia as ASIC does not object to the use of dark pools.
The passporting of funds with ease is also likely to come as great news to introducing brokers from the Far East wishing to operate omnibus accounts and operate their business with Australian firms.
Regulatory passporting between other regions is not specifically a new concept, with Cypriot regulator CySec having attracted numerous retail FX firms due to its ease of entry, low operating costs and ability to provide regulated FX services across Europe due to MiFID’s passport.
In this circumstance, however, it could be viewed that whilst Europe’s economic situation continues to decline, and a question mark having hung over Cyprus’ sustainability as a solid and reputable jurisdiction in which to do business post-bank crisis, business in Europe can only go so far. Many nations in the European Union do not have a developed financial markets economy, and indeed do not have a large number of FX traders.
For companies based in Europe whose aim is to carve out a long-standing market share, London has been the destination of choice, partly because of its reputation among a Far Eastern audience as the world’s number one financial center.
Should Australia carry out the ability to passport funds, furthering its already highly credible trading relationship with the Far East, it may well be that all eyes will look east from within the Antipodes.