Forexopedia

Retail Currency Trading Up, Attracting Scrutiny, Greenwich Says

May 5 (Bloomberg) – Regulators are placing greater scrutiny on currency trading by individuals after so-called retail volume increased 16 percent last year, according to Greenwich Associates.

Trading on platforms such as Internet sites increased to $12 trillion in 2009, while overall foreign- exchange trading dropped 6 percent, the Stamford, Connecticut-based research firm said in a report today.

A proposal from the U.S. Commodity Futures Trading Commission that would impose requirements for retail brokers on disclosure, reporting and record-keeping, as well as introducing a cap on leverage individuals can use in trading, could drive investors to other countries, the firm said.

“In an era in which switching to an offshore broker requires little more than clicking to a new website and opening an account, this is a legitimate concern,” Greenwich Associates consultant Peter Kane said in the statement.

Global currency trading volume set records in 2007 and 2008 during unprecedented volatility as financial system turmoil spurred an increase in activity among companies and large financial institutions. It fell last year as market stability returned and as hedge funds placed fewer trades than in the past, according to Greenwich.

The market share of retail platforms has been climbing amid the increase in individual trading, with retail aggregators accounting for 28 percent of spot transactions, up from 24 percent in 2008, the report said.

“Those numbers indicate that retail aggregators generate some $375 billion in spot transactions per capita every year – a figure that ranks them among the most active and important accounts in global foreign-exchange markets,” consultant Peter D’Amario said in the report.

Japan has the most active individual traders, where retail trading account for more than half of overall trading, the report said.

To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net