A group of six (foreign) firms offering CFD and Forex trading in Australia have announced that they have formed the Australian CFD Forum. The forum’s purpose is “to enhance the efficient operation, transparency and overall investor understanding and confidence in CFDs within Australia and in the Australian CFD industry as a whole.”
In our view, the purpose of the forum is to “head off at the pass” a severe reaction by ASIC (the Australian financial regulator) to last year’s bankruptcy of U.S.-based MF Global, which had a major (approx 15%) position in the Australian CFD market. As in the U.S., much of MF Global Australia’s client cash went missing, and due to certain other complications has made it difficult for Australian clients to get their money back. By creating a self-regulatory body, and establishing what the forum is calling 16 standards of conduct (which the group did not specify), the hope is that ASIC will let the industry take care of itself, without imposing its own rules, as is happening now in the U.S. and Japan.
We found it interesting that the group forming the forum consisted of four U.K.-based firms (London Capital Group’s Capital CFDs, City Index, CMC Markets, and IG Group), Saxo Bank from Denmark, and GFT from the U.S., although the group claims that it represents 90% of the Australian CFD market.
What is obviously missing from the forum are Australian-owned firms, which are quickly picking up market share. We don’t believe this was done by accident. One of the reactions we are seeing to the MF Global (and WorldSpreads) fiascos is an increasing preference for traders to stay close to home with domestic-owned firms. Indeed, domestic-owned and -run firms in Australia such as AxiTrader and Pepperstone have been growing rapidly and taking market share away from some of the established foreign firms the past while. It looks like the foreign firms decided to come together, and present themselves as “the” industry to Australian traders.
For more on the global FX and CFD markets see the LeapRate-Dow Jones Forex Industry Report.