Singapore traders, is it time to consider an overseas Forex broker?
In October 2019, the Monetary Authority of Singapore enacted a critical new ruling to change the maximum leverage for foreign exchange products from 500:1 to 200:1. That meant investors trading with Singapore-based forex brokers had to put down a larger margin in order to make the same sized trades as they used to.
While the new ruling was designed to protect retail traders – who are not accredited investors, expert investors, or institutional investors – from the higher risks of trading in leveraged derivatives, it affected other investors for whom a higher leverage is necessary to maximise their trading returns.
So what can investors look at next? An overseas-regulated forex broker may be your next consideration.
Let us be clear here. Not all regulators are equal. The top tier regulators provide the greatest oversight into their markets, provide clear regulations and guidelines, and are able to influence the various players into following those regulations and guidelines, for the benefit of the public. On the other hand, these regulators are also less likely to allow high leverage, in order to protect investors from raking up huge losses on their leveraged trades. For instance, the Financial Conduct Authority of UK (FCA) allows maximum retail leverage of just 30:1.
Here are some brokerages you could consider for higher leverage.
Australian regulated forex brokers
Forex traders looking for a 500:1 leverage can consider brokerages regulated by the Australian Securities & Investment Commission (ASIC).
For instance, Pepperstone, IC markets and CMC Markets are just some of the ASIC regulated brokers offering a maximum leverage of 500:1 to retail traders.
Of course, every broker offers different unique features and benefits. According to Compareforex – a leading comparison portal for forex brokers – Pepperstone and IC Markets offers all 3 popular trading platforms: MetaTrader 5, MetaTrader 4 and cTrader. CMC markets also offers stockbroking services and is the top CFD broker among the forex brokers compared. While IG only offers a maximum retail leverage of 200:1, it is the most popular foreign exchange broker.
Forex traders should also note that ASIC is currently seeking to lower the leverage offered to retail traders in 2020, so traders may not be able to enjoy the maximum 500:1 leverage for long.
Forex brokers with second tier regulators
For even higher leverage, retail traders can consider forex brokers regulated by the Financial Services Conduct Authority of South Africa (FSCA).
AvaTrader and Pepperstone offer a maximum retail leverage of 500:1 while AvaTrader and FXCM offer a maximum retail leverage of 400:1. The highest maximum retail leverage of 1000:1 is offered by HotForex on 49 currency pairs.
Incidentally, ForexTime (FXTM) which is regulated by the Financial Services Commission (FSC) of Mauritius also offers a maximum retail leverage of 1000:1.
Investors should be aware however that FSCA had previously received criticism for not having sufficient active oversight into the brokers under its purview, and for not protecting investors enough. And FSC is not a well-known authority when it comes to financial regulation.
Suffice to say, investors looking at these brokers should tread carefully.
There are also forex brokers around the world that are not under any regulatory oversight at all. These include brokers like Hugosway, and Tradersway. Hugosway says it is a true ECN broker offering a 500:1 leverage requiring a $10 minimum deposit, while Tradersway says it is a STP/ECN broker offering a 1000:1 maximum leverage and requiring a $10 minimum deposit.
Should investors consider these forex brokers? The answer is no.
With no regulatory oversight, these brokers are not under any obligation to protect retail traders. There is no guarantee that they will safeguard your monies and they could just as easily be actively trying to profit from your trading losses.
No amount of leverage is worth risking all your money on.
Leverage should not be your only consideration
Forex traders need to consider much more than the leverage being offered by a broker. The quality of the regulator governing your forex broker, as we discussed earlier, is just one such consideration.
Forex traders need also consider the spreads offered by the brokers, the number of currency pairs on offer, the platforms they support, and the other investment asset classes that they offer beyond forex that you might want to trade as well.
A forex broker that can support most, if not all, of the investment asset classes and investment products that you would like to trade can provide a much greater convenience to your trades, and could be worth its weight in gold.