Pepperstone is pulling out of Japan as it is not regulated in the area. Just a few days before, FXCM Japan announced that they are going to quit offering CFD services for Japanese retail traders. What happened in Japan?

Yesterday (2/10), Forexmagnates reported that Melbourne-based forex broker Pepperstone is pulling out of Japan as it is not regulated in the area. Just a few days before, FXCM Japan announced that they are going to quit offering CFD services for Japanese retail traders. What happened in Japan?

Japan flag

JFSA Tightened Forex Regs

Japan is one of the countries with the strictest regulation for its forex industry. The country has huge number of individual and institutional traders, but Japan Financial Services Agency (JFSA) also have relatively strong hold on the industry.

Japan has gradually tightened regulations since maximum leverage reduction was introduced in August 2010. Prior to that date, Japanese traders could trade with leverage as high as 1:700. However, in August 2010 Japan regulator ruled that maximum leverage allowed is just 1:50. A year later, the maximum leverage was further reduced to 1:25. It is even lower than US regulator ruling that allows leverage of up to 1:50. Consequently, this attract many Japan residents to register with overseas forex broker instead. Up till that point, JFSA rarely sanctioned against unregistered forex broker abroad.

However, according to Forexmagnates back in May, JFSA has issued warning against forex brokers that are not regulated in Japan. In particular, up to 73 warnings are issued to unregistered  operators overseas by the end of March 2014. Because there are a number of Australian-based broker that accepted Japanese clients, the JFSA is also said to have communicated with Australian regulatory authority, ASIC, on this matter.

 

Pepperstone Withdrawal

Pepperstone, arguably one of the most popular Australian forex brokers, decided not to receive clients that reside in Japan again starting from October 2, 2014. They cited JFSA ruling as the reason to refrain from serving Japan-based clients before having the license needed to do so. Therefore, Pepperstone's Japanese-dedicated website is going to be removed too, although it was just launched in August. Existing Japanese clients are given time till Desember 31, 2014, to close all open positions.

PepperstoneA screencap of pepperstone.com/jp homepage

Meanwhile, as is the custom of PR stunt, Pepperstone announced more positive news in conjunction with the publication of their withdrawal from Japan. A request for license from New Zealand's Financial Market Authority is said to have just been approved this week. New Zealand's FMA has step up its regulation this year and started to be known as a well-reputed regulator in the world, so this is certainly a good improvement. 

 

FXCM And Gain Capital Restructurization

Not only withdrawal, Japan regulation also prompted some forex brokers to restructures their business in the country.

Earlier this week, FXCM Japan announced that they stopped offering CFD trading for their Japanese retail traders, and the instrument will only be available for professional clients that have been registered with the JFSA. This is because Japan requires retail traders to own separate accounts to trade Forex, Commodities, and Indices. Because of that, FXCM Japan decided to focus CFD trading on professional traders only. Beside of FXCM Japan, Forexbrokerz reported that preceding FXCM Japan announcement is US-based Gain Capital restructurization of its Japanese subsidiary. Gain Capital in the country have rebranded as Gain Capital Japan and chose to focus on institutional business.