ASIC blocks forex broker’s IPO 

ASIC_regulator

The corporate watchdog has blocked the potential float of an online foreign exchange broker, FX Primus, as concerns mount about the prevalence of brokers setting up shop in Australia to target forex punters in the region.

FX Primus Group initially lodged a 135-page initial public offering prospectus to raise equity with Australian Securities and Investment Commission on April 16, but the regulator has, as yet, refused to allow the float to go ahead, according to a spokesperson.

“ASIC had a number of concerns and an interim stop order was placed on the FX Primus Group Limited’s prospectus on April 30, 2015,” said the ASIC spokesperson in response to questions about the status of the raising.

“ASIC also notes the extensive regulatory and enforcement work conducted in the FX space and our concerns in relation to companies listing in Australia and conducting business in emerging markets,” the spokesperson said.

FX Primus first met with potential investors in November 2014 through broker Wilson HTM according to Street Talk to discuss a $200 million IPO. The company is reported to have initially considered a float on the Frankfurt Stock Exchange.

CYPRUS HQ

The group is headquartered in Cyprus and lists the Cyprus Securities and Exchange Commission as its regulatory supervisor. The firm is also the official forex trading partner of wealthy English football team Manchester City. FX Primus did not respond to a request for comment at the time of publication.

Another FX online brokerage firm Pepperstone, founded by young rich listers Owen Kerr and Joe Davenport also met with investors with a view to a public float but have yet to proceed. The firm was forced to pull out of the Japanese market where local regulators have restrictions on leverage that are not enforced in Australia.

The prevalence of brokers registering in Australia has been discussed widely by the Council of Financial Regulators, which includes ASIC, the Reserve Bank of Australia, the Australian Prudential Regulation Authority and the Treasury. The growth of the online forex brokerage industry in Australia is understood to be troubling senior regulators within the council, including some with extensive expertise in the structure of international foreign exchange markets.

In March, ASIC chairman Greg Medcraft told a parliamentary hearing that Australia was being “picked off” by online foreign exchange brokers that obtain licences and allow clients to bet on currency moves with up to 500 times leverage.

Brokers have set up in Australia to target Asian retail forex punters, taking advantage of the strong standing of Australian regulatory framework to attract new accounts. But ASIC has become more demanding of new brokers.

“We’re doing what we can in terms of vetting those who apply for licences in this area, particularly those that don’t have a [true] connection with Australia that are operating outside of Australia,” Mr Medcraft said in March.

Sources said ASIC has not issued a new licence to forex brokers for almost two years and in some instances had not explained the reasons for blocking registrations.

The tough stance from the corporate watchdog comes as the retail forex trading market experiences phenomenal growth as brokers lure millions of customers to trade online. Daily ­turnover in retail forex trading has more than doubled from $136 billion to $380 billion since 2007 driven largely by growth in Asia.

Source: Financial Review – ASIC blocks forex broker’s IPO

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