Investor confidence is key
New legislation entitled the Financial Markets Conduct Act (“FMCA”) has been passed in New Zealand that creates a totally new financial services licensing framework. It has major ramifications on what is required for forex brokerages and provides an opportunity to hold a world-class license that can provide a stamp of quality for investors that seek a high level of investor security confidence.
In 2013 New Zealand held 1st place as the least corrupt country in the world (tied with Denmark) in the Transparency International Corruption Perceptions Index 2013 and is listed as the 3rd easiest country to do business in the world in World Bank Group’s Doing Business 2014 Report1. As such, it’s a destination of choice for forex brokerages that seek a high standard of regulation to satisfy the safety and security needs of investors.
Investor confidence may drive a flood of new accounts. One of the most frequent questions we are asked is “ Who is a reliable forex broker”?. Investors are uncertain and the capital protection of the principal invested is their primary concern, and rightly so.
Under the new financial services licensing framework forex brokerages licensed in New Zealand will need to hold a new category of license called a “Derivatives Issuer”.Although you could argue that spot forex is not a derivative, the New Zealand regulatory authorities have specifically named “margin contracts” and “rolling spot contracts” to be classified under this category (FMCA Section 8 (4)(b)(iv)). This provides an opportunity for forex brokers to gain the regulation and respect that other types of financial services firms enjoy when doing business in the marketplace. One can apply for the new Derivatives Issuer license as early as 1 April 2014. No forex broker can solely rely on the Financial Services Providers license (the current scenario) on it’s own, from 1 December 2014.
Between now and 1 December 2014 there are several favorable options on how forex brokerages can navigate themselves into the new regime. Now is a great time to get started with a New Zealand licensed forex brokerage. If you act soon, the lead-time to get your forex brokerage offering forex transactional services is relatively short.Time is of the essence. Act now and contact me to find out more about setting up your forex brokerage with a license from New Zealand.
Rachel Hunter of TraderRach.com is a Chartered Accountant in New Zealand who specializes in the licensing needs for forex brokerages seeking a quality license in New Zealand. Get in touch with Rachel at www.traderrach.com or firstname.lastname@example.org for more information.
Richard Perona is a Business Intelligence Specialist at Boston Technologies.
He has been immersed in the FX market with a broad history from trading at the FX desks of major world banks to managing flow at retail FX brokers. Richard has a deep understanding of the FX industry, while specializing in G20 and exotic currency trading.
Contact Richard at email@example.com to find out how to setup your own FX Fund or FX Brokerage Company.
This information is based on personal opinion and should not be construed as legal advice or formal recommendation.
http://www.transparency.org/cpi2013/results https://openknowledge.worldbank.org/bitstream/handle/10986/16204/19984.pdf?sequence=1 http://www.radionz.co.nz/news/business/226161/nz-remains-third-easiest-place-to-do-business