Forquite some time already, even people who jokingly discarded the idea of Forex market ever get banned understand that this isn't such an implausible presumption as it had been in the days of more or less uncontrolled growth of the online retail FX industry.
With thecurrent regulatory situation being very close toanoutright ban ofretail FX trading, will it take long forthecoordinated effort bydeveloped countries tooutlaw speculative Forex trading completely? Thelegality oftrading is called into question inmany jurisdictions. If we look attherecent developments intheindustry, you will notice thefollowing signs:
- Since August 2018,the European Securities and Markets Authority (ESMA) severelyrestricts CFD (including Forex) trading inthe European Union, including a cap of 1:30 maximum leverage for retail traders.
- Israel has banned binary options forits citizens andalso made it illegal tooperate binary options companies from within thecountry. Binary trading is closely connected toForex/CFD trading, which ofcourse is not associated with gambling asstrongly asbinaries, but it will not be ahuge step fortheregulators toextend theban toalso involve theFX.
- Some countries in the European Union had banned (like Belgium) or limited significantly (like France) all OTC Forex andCFD trading even before the ESMA's intervention measures were implemented.
- Abit older but still relevant development is thecrackdown onleverage andstricter broker rules intheUSA andJapan. Although these changes have strengthened theconsumer protection, they have also reduced thecompetition in the industry.
Themain argument infavor oftheban is that most retail traders lose anyway, making Forex trading akin togambling. Thesituation is worsened byproliferation ofscams intheindustry. Prohibiting participation ofindividual traders in the Forex market would likely help thestate toget rid ofquite afew problems.
However, there are some factors making banning Forex trading quite impractical:
- Smooth operation oftheFX market inits current form is important, andtheretail industry is playing arole inits infrastructure.
- Global (ornearly global) ban would require acoordinated effort from too many governments, which is not plausible atthis point. Andif theeffort is coordinated poorly, there will be loopholes fortheindividual traders toexploit.
- Corporate interests andthe
industry-created employment will suffer incase such aban is implemented.
Moreover, even if agroup ofdeveloped countries (let's say all theOECD members) manage tooutlaw Forex trading successfully, theaction might draw alot ofpublic criticism astheban would be most certainly considered asanattack oneconomic freedom.
Most tradersconsider acomplete ban onretail FX ahighly improbable event inthenext few years. It is likely that alot more regulation will be applied tothefield, but it is also likely that we all still be able tobuy andsell afew lots toearn our share ofprofit.
If you would like toshare adetailed opinion onthepossibility ofForex closing down forcommon people, please proceed to our forum to discuss this issue.
