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Japan mulls cutting OTC forex leverage to 1:10 – media

Nov 06 2017
By
Jonathan Smith

The Japanese Financial Services Agency, which among other things regulates the activities of the Japanese OTC forex brokerages, is mulling to cut the max leverage offered to retail clients to 1:10, reports the site Finance Magnates, quoting own sources.

 

This would be the third cutting of the leverage since 2008, when the cap was set at 1:50, followed by another halving to 1:25 several years later. Currently the 1:25 leverage is among the lowest, along with that in Turkey, which recently was set at 1:10.

 

According to the report, the new limitation will affect only the privately-held forex brokerages and will not affect the state-owned Tokyo  Financial Exchange and its service Click365, as it does not offer OTC products.

 

As per the Finance Magnates article, the retail forex industry in Japan will not be very happy about the new limitations.

 

We were presented with various hurdles such as high capital adequacy requirements. We overcame those with joint efforts from each company and as a result, we were able to strengthen our balance sheets”, Industry veteran Nori Muzuki told the site. “It is unfair to protect the public trading venue and punish the private sector and the move will not protect investors. If the leverage becomes 1:10, then honestly, the market will shrink. In the last 20 years or so, the foreign exchange market has been widely expanded by individual investors. Until now, we have balanced investor protection and the degree of openness of the forex market,” he added.

 

The Japanese retail forex sector is the largest in the world, with an average daily volume of $364 billion in the first quarter of 2016, shows industry data quoted by Reuters. The market is dominated by two major players – GMO Click Securities and DMM.com Securities who together hold around 40% of the market share. There are also around 10 more small players who hold the rest.

 

Both GMO Click Securities and DMM.com are part of large Japanese conglomerates who offer all sorts of services, including other forex brands and financial services, both locally and internationally. The former is part of GMO Group, which offers a wide range of online, technology and financial services, including a cryptocurrency exchange platform and a token: GMO Coin. DMM.com, which specializes mostly in online entertainment, also has a bitcoin service, in partnership with the major Japanese exchange Coincheck. DMM.com also used to have an Australian forex broker DMMFX, which however, shut down.

 

TAGS: japan  leverage  forex 

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