LeapRate Exclusive: Western firms may benefit as new Indonesian rulings strive to banish FX

Indonesia’s national financial markets regulator will not issue new licenses to FX firms. Will Australian firms reap the rewards?

For a great many retail FX companies, the Asia-Pacific region is considered a land of tremendous opportunity. China was considered the mainstay of western FX firms’ focus when channeling efforts toward the region, however as time has gone by, companies with Chinese clients have begun to cast their net further, embracing the notion of gaining client bases from other nations in the region.

Indonesia is one particular country which is something of an enigma as it is home to a large population, is rapidly developing and does not have a large domestic FX industry.

Indonesia’s financial markets regulator Bappebti has recently embarked on a draconian campaign which most certainly would curtail the activities of FX firms wishing to operate on its shores.

On March 14 this year, Indonesia’s national regulator announced that it will cease to issue new licenses to newly established brokers which register their businesses from March 15th, 2014.

The newly passed law contains 3 points:

1. A statement that Bappebti will no longer process any license application submitted after March 15th, 2014

2. Any request for license made before March, 15th, 2014 will be processed based on current regulation, without any implications

3. This announcement will effective since March 15th, 2014 and valid for two years and could be extended whenever necessary.

The national regulator could opt to elect for prohibition of local brokers to use any legal loopholes in order to absorb potential clients, as there are further considerations which are intended to put a stop to the commercial advertising of FX products in Indonesia, with many other factors likely to be included in the rulings as follows:

Brokers are prohibited to publish or to advertize any job vacancies in any media (electronic or printed) to be directed at their potential clients or customers.

Prohibition for brokers to offer any job vacancies by what Bappebti may regard as a negative means, which is not a fact or resorting to the disgusing of fact which may lead to any detriment to members of society.

Brokers to take full responsible to the content of their job advertisement materials which spread to the society in any form of medias (printed and electronic)

The Indonesian authorities have published quite categorically that sanctions will be imposed on any brokers that violate any of these points, and that legal force can be enforced as a consequence, according to Bappebti Chief Ir. Sutriono Edi, MBA.

Indeed, with such a steadfast ruling, this could prove to be a potential boon for overseas firms in the region, particularly those in Australia, a nation whose national regulator is well regarded among many Asian clients wishing to trade FX without the somewhat overbearing prohibitions in domestic markets. Indonesia is the second nation in Asia to take a harsh stance toward its own retail FX markets recently, with Vietnam having made its position clear by banning trading floors and considering them to be illegal entities, presenting further opportunity to western firms as these regions only have jurisdiction over domestic markets, and short of restricting internet access, cannot prevent FX traders from either nation placing their business overseas.

Of course, the collaboration between certain nations on cross-border derivatives trading continues, but only regions with established financial market economies and electronic trading centers such as Europe, North America, Australia, Japan and Singapore are likely to cooperate on the instigation of such a framework, with developing nations such as Vietnam and Indonesia unlikely to participate.

Gulnara Yakupova, CEO of Larks Digital Agency has significant experience in working with FX firms in Asia, and today explained to LeapRate that “Suspension of issuing licenses is on the one hand one more step toward ensuring a systematic status surrounding the regulation of the Indonesian market, but on the other is a way to create convenient conditions for large local players. Two years is a sufficient period to rearrange jobs and harden positions.”

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

Read Also: