Despite displaying huge levels of potential over recent years, the APAC trading landscape is not without its flaws. In the age of promising development, it’s within the interest of both brokers and trading firms alike to avoid jumping the gun if they’re to receive their dues.
In this guest-authored post for The Fintech Times, Thomas Chang, Regional Business Director for Asia-Pacific for the Australian, ECN Forex Broker Vantage FX, explores Southeast Asia’s trading landscape and what needs to be done to upgrade it.
Throughout Asia-Pacific (APAC), are a new generation of traders, eager to invest. These traders are often wealthier and more business-savvy than their predecessors, and with economies taking off and a growing number of net-worth individuals (HNWIs), these markets have huge potential to grow.
However, this is a prime example of a region with huge untapped market potential. Yet, it has historically been overlooked and underserved in terms of the financial services available. There is currently a new generation of brokers and market makers that are emerging in Southeast Asia, but standards remain low compared to other regions, and there are very few established brokers who are both local and have historic expertise in emerging markets.
It’s time to address the problems in these markets and improve the service available to traders in the region. After all, emerging markets are the future of trading.
Improving Local Resources
The most important problem that needs to be solved is that traders in emerging markets do not have their local needs addressed. The way people trade varies greatly from country to country, particularly in such a diverse and expansive market as the Asia-Pacific, but seldom do firms tailor their services to meet these local needs.
Both experienced and beginner traders require regular market information to inform their investment decisions, as well as guidance on how to use trading tools. If they’re not informed, they simply can’t make the best trading decisions. Although a few international brokers have expanded into these regions, it is often the case that they don’t have a local team or provide local language services.
Because the pool of resources is more limited in these markets, traders are at a huge disadvantage and need better support. Brokers need to step up and act as that valuable source of information and guidance, educating their clients at all levels to improve their trades as much as possible.
The Right Technology
The goal of any broker should be simple: to provide a platform that allows their clients to seize market opportunities. However, this isn’t always the case. Particularly when entering a new market, some brokers focus primarily on extracting profit without putting client outcomes first, and then they move on. Unfortunately, as the financial services landscape is less mature, traders in these markets often lack awareness as to what the best execution looks like – something which scammers have been quick to exploit.
To combat this, traders must be acutely aware of execution and slippage to make sure the spreads of their brokers are competitive. In fact, having access to cutting-edge training is the easy part, it’s understanding what to look out for which is difficult.
Similarly, the range of products and tools in these regions is fast evolving and traders must shop around for the platform that best suits their ambitions. The broker should provide a seamless platform, a multitude of management tools, and different local payment options, as well as education and support services. In particular, this region has leapfrogged legacy technology straight to mobile phones so mobile-friendly tools are particularly important.
Finally, implementing effective and clear regulation remains a big obstacle that needs to be overcome. Regulation plays a huge part in protecting investors, but it’s currently complex, particularly for firms entering a new market. With the major differences in regulation when it comes to trading, it is likely to become increasingly difficult as regions evolve and grow in sophistication.
Most brokers don’t have the experience of operating across a number of different regulatory environments, meaning they don’t understand compliance in these varying markets and cannot anticipate potential challenges. That means the established trading firms either don’t bother to enter the market or enter and can risk breaking compliance. As a result, many of the brokers in the APAC region are unlicensed, putting investors at risk in a whole range of ways.
In order to introduce a safer investment landscape, regulators should provide crystal clear guidance of requirements, while firms should take a diligent approach to compliance to avoid fines. Traders, however, must also take the responsibility of ensuring the broker they work with has the appropriate regulation. That way they can be sure that their funds are safe.
There is no doubt that trading in these markets is beginning to rocket. The APAC region is a long way from the likes of the UK and US, but it’s moving in a positive direction that could prove just as fruitful for investors as it is for brokers. It’s an exciting time that will open up equal investment opportunities to those who previously haven’t had access.