Thanks @Clint, I was just writing something about that Finance Magnates article.
Overall, I feel quite optimistic that these changes will bring some positive and very significant changes to this industry. We all know that most of those who come to high-leveraged retail forex, and who are financially inexperienced, lose their money. And often it is money they cannot really afford to lose.
The problem is mainly due to the non-existence of identifiable reliable, professional, cheap and effective training facilities and mentoring services, combined with a widespread broker mentality that has been feeding off the losses of these types of clients. But, as the article says, brokers will now need to reassess their emphasis in their approach to client acquisition and retention strategy, and their future source of profitability, if they wish to stay in the industry.
There are two important points here: Brokers will be required to provide a negative balance protection and also will need to display in their marketing message what is the percentage of their clients that lose money. Both these requirements are perhaps more significant in causing changes in broker policies than the mere change in leverage (which just means a need for a bigger equity to match the same level of risk exposure). Broker earnings will focus more towards commission earnings instead of the losses from their clients trades. This means brokers will now be looking for long-term clients that are consistently successful and trade larger positions rather than a rapid turnover of failed clients who just end up transferring their small assets to their broker’s bank account.
As the article suggests, these changes may result in brokers competing for the more successful clients and, at the same time, focusing more on helping their clients to succeed by providing better education and advisory facilities and a better level of service overall. All of which is a very positive direction.
Naturally, the threshold for entering the retail sector will probably rise and prohibit the very lowest levels from entering it at all - but is that really a bad thing - even from their own perspective?
My main concern is that these changes may be too big and too rapid and may well lead to a negative disruption in this industry as it tries to adapt to these new requirements without a reasonable time window in which to do so. Perhaps that is a symptom of a situation where changes are late in being introduced in the first place?