Australian Forex Trading Growth And Broker Adoption

The worldwide forex market is booming with the daily turnover doubling since 2007. Australian forex trading volumes are no exception in Australia with Aussies loving a punt and making trades based on a knowledge gained over time. What is surprising though is that forex brokers absolutely love setting up shop in Australia. We delve into this phenomenon below.

High Leverage Is Allowed In Australia

Australia has best forex brokers such as Pepperstone which offer leverage levels of up to 500 to 1. The table below best explains leverage where for example, if you had $100 and could trade with a 500 to 1 leverage you effectively could be trading $50,000.

High Leverage Table

High leverage means the ability to make greater profits but of course also greater losses. The increased risk profile associated with leverage is why regulators in Hong Kong, Japan and the USA have chosen to cap it as low as 25 to 1. The ability not to be restricted to a leverage cap is therefore one of the key drivers to why forex brokers prefer Australian regulation.

Australia Has A Safe Financial Background

Australia has done extraordinarily well over the past decade weathering financial storms such as the global financial crisis and the Asian economic crisis. The financial sector’s ability to come through this volatility relatively un-scarred has enhanced the countries regulator. Forex brokers that can therefore become Australian regulated not only have a leverage advantage but also gain credibility instantly.

This safe environment with sound regulation has been thrown into question recently however. In late 2015 and early 2016 the CFD and FX Forum which is an organisation set up almost exclusively as a Government lobbyist has been fighting hard to ensure proposed leverage limits are not imposed in Australia. Leverage offered by brokers, particularly offshore entities has sky-rocketed recently with some even offering leverage as high as a whopping 800:1! This is a cause for embarrassment for regulatory peers abroad are moving to thwart Forex companies offering whatever leverage ratios they like. All this being said, the Australian commission has a sound track record as a regulator and Australia is one of the most stable countries in the world to conduct business in. This is ideal for Australian forex trading.

It’s Relatively Straightforward To Receive Certification

Many forex industry expert feel that gaining a financial services license to become an Australian forex trader is relatively straightforward compared to some neighbouring countries. This is not to say the process is easier or that there are fewer requirements but the transparent process offered continues to attract FX Brokers.

Australian Forex Broker Market

In recent months, the Australian watchdog have made this process a bit more complicated vetting brokers who don’t have a true Australian connection and are really just operating overseas. This remains a topical area and was a core focus on a recent “Council of Financial regulators” meeting.

So Why Should Australian’s Choose An Australian Regulated Broker?

Forex brokers in Australia must have a financial services licence (AFSL) which are regulated by the Australian Securities and Investment Commission. To be ASIC regulated a licence requires the following conditions to be met:

Segregated Deposit Account
Australian forex brokers must keep deposits in a separate account held within Australia. This is often a local bank account (eg NAB or ANZ). What this means is that the broker cannot place the deposit into the currency market pool and if the firm reaches financial difficult the deposits are safe from bankruptcy.

There are minimum training standards for staff and owners of fx broker firms set by the Australian government. This helps meet compliance requirements and helps ensure clients are educated on currency trading.

Like all companies in Australia, the Australian commission have strict requirements when it comes to the accounting and their regulation of fx brokers is no different. These firms must meet accounting compliance standards ensuring they don’t go rouge with their standards.

Risk Management  Audits
The financial watchdog regularly audits brokers to ‘stress test’ them in different scenarios. It’s no surprise therefore that during the Swiss currency shock no Australian broker when into financial trouble unlike brokers overseas.

How Should I Compare Forex Brokers?

Obviously as outlined above, when comparing forex brokers it’s critical to first make sure they have the relevant Australian licences by the Securities and Investments Commission  (ASIC Regulated). Below are the other key factors to consider when completing a forex broker comparison.


As explained earlier, Australian forex trading is a leveraged product. This means that a forex broker amplifies an Australian forex traders deposit from 50 times (50:1) to 500 times (500:1). Experienced forex traders or those using automation may require the highest leverage available. Others who are not high risk traders may want to avoid these brokers or request the broker lowers there maximum leverage amount. An example of a high leverage foreign exchange trading broker is Pepperstone.

Risk Management Tools

As traders can lose money fast due to leverage there are risk management tools that forex brokers offers. Stop loss orders are the most common tool that all fx brokers offer. This allows a broker to set a maximum profit or loss amount of any trade. A more advanced risk management version is a guaranteed stop loss orders. It means that the broker guarantees that in all circumstances a loss is guaranteed not to exceed the defined amount set. Another way to avoid an Australian forex trader to lose money that exceeds there deposit is balance protection. This means that a broker will exit a traders position and guarantee no losses will exceed the deposit. A good example of a broker offering this is EasyMarkets.

Range Of Markets

While there are several currency pairs responsible for the bulk of currency trading such as the AUD USD many traders look for exotic foreign currency trades. Only some brokers offer the full range of forex markets. Then there are other financial markets such as CFD trading which work similar to an exchange rate where shares, commodities and indices can be traded. One of the leading range of market brokers is IG Markets.

Forex Trading Platforms

Every broker has a forex platform which can be a shared platform such as MetaTrader or an exclusive trading platform. Australian forex traders will often have a preference towards a forex platform they are used to. If this is a shared platform then it’s easier to switch forex brokers long-term without having to learn a new trading platform. MetaTrader 4 and MetaTrader 5 are the two most popular trading platform and are both offered by IC Markets.

Spreads And Fees

Brokerage impact traders looking to buy and sell by charging fees. Fees when you trade forex can be a spread (the difference between a buy and sell quote) or a commission based on volume. A smart move is to compare AUD USD spreads and commissions from each of the brokers sites. A low brokerage forex broker to consider is AxiTrader.