Markets

2020 Uncovered – The Biggest Challenges Faced by Forex Brokers in International Markets

The global forex market is a truly fascinating entity, and one that continues to grow consistently and incrementally during the digital age.

More specifically, this market now sees an estimated $6.6 trillion traded globally every single day, with this number having increased from a little over $5.3 trillion over the course of the last decade or so.

Interestingly, the market has continued to grow exponentially during the coronavirus pandemic, amid genuine volatility and wild price fluctuations. However, challenges still remain for international brokers, and overcoming these is central to success in 2020 and beyond.

How has Forex Grown During 2020?

There’s no doubt that the forex market contrasts sharply with the performance of other sectors during the Covid-19 outbreak, although the size and extent of the sector’s boom is unusually stark when compared with the wider global economy.

Generally speaking, brokers have reported widespread growth in terms of accounts and revenues during 2020 to date, with one example (provided by IronFX) confirming monthly growth of 25% to 50% in its number of active forex accounts.

In numerical terms, this translates into approximately 220,000 new client accounts over the period of March through June (or Q2 to be precise), while associated trading volumes also increased by an estimated 300% during the same period.

Such growth rates were particularly pronounced in developing nations and economies, with traders’ accounts from Southeast Asia, Africa and Eastern Europe comprising 60% of all new accounts opened.

This growth has also bled into other markets and asset classes, particularly commodities such oil. This makes sense in many ways, as there remains a strong correlation between oil and currency values (especially the US Dollar), while there’s an opportunity to leverage this and profit from the recent decline in oil prices.

What are the Main Challenges Faced by International Brokers?

Despite this sustained growth, brokers that operate in the global forex market continue to face a number of difficult and universal challenges.

One of the most seminal revolves around trust, particularly as growth and demand in the sector has inspired a rise in the number of rogue brokers operating across the globe.

This issue is also exacerbated by the dominance of a select few forex brokers, who claim a vast share of the marketplace and continue to attract the majority of clients. This makes it hard for independent operators to thrive and claim their own market share, undermining the level of competition and creating an opportunity for criminal elements to capitalise.

Global brokers are also having to cope with significant changes in compliance rules and rapid regulatory shifts, with these challenges compounded by the lack of a single regulatory framework within the worldwide marketplace.

Sure, reputable UK brokers can be identified by their Financial Conduct Authority (FCA) accreditation, but this is only a single layer of protection for clients in an age where mistrust and advanced spyware programs are rife within the industry.

Fortunately, global operators can tackle this head-on by working closely with an international consultant and specialist like RSM, which boasts experience in industry regulations and the implementation of tax, audit and transactions rules across the board.

Make no mistake; this creates a solid framework in which international brokers can operate, providing a foundation from which they can capitalize on increased demand and grow organically over time.

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