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The Foreign Exchange market, also known as the Forex or FX market, is where traders exchange currencies 24 hours, 5 days a week. With over $5 trillion worth of trades taking place daily, the Forex market is the largest and most liquid one across the globe.
Depending on the jurisdiction, the Forex market can be subject to stringent regulation — or outright banned. Is Forex legal in Australia? Yes. The Australian Securities and Investments Commission is the governing body responsible for regulating Forex trading.
Forex trading in Australia, in particular, has thrived thanks to its Government, for the most part. Although Forex trading has been popular in Australia for some time now, the real appeal began in 2015, after stories of the Swiss franc increasing by a larger margin began circulating in the media.
But with an increase in the popularity of a profitable market comes an increase in those looking to take advantage. This makes regulation crucial for the safety and security of traders.
Brokers or firms not under regulation do not adhere to any set of standards which can lead to fraudulent and illegal behavior. Even worse, if something goes wrong, your funds are often not protected.
Forex broker regulations therefore, are the cornerstone of the Forex market, holding brokers to standards that are in the best interests of traders.
Due to the global and decentralized nature of the Forex market however, regulations vary across jurisdictions, impacting trader eligibility. Brokers in the US must comply with different regulations to those in the UK, or Australia. In essence, the protection you are given will depend on where the broker is based, and the regulatory body it is registered with.
For example, while the US has imposed strict regulations and penalties for any violations of these on the Forex market, Australia has aimed to offer a simplified financial system that regulates the Forex market enough to maintain a safe and secure environment, without imposing too many restrictions or penalties.
In fact, the only legal restrictions enforced by Australia's regulatory body ASIC, is that trading platforms must limit credit card deposits to $1,000 when clients open an account. Apart from this, no leverage restrictions apply, or legal requirements, other than tax payments.
The market is also highly susceptible to volatility from economic turbulence, which regulations simply cannot protect us from. We'll briefly explore these impacts by looking at the ongoing coronavirus pandemic.
Overall, while the Australian financial system does offer customers protection, it is more relaxed than that of the US and UK, allowing both Forex traders and clients more room to breath.
Leading Forex Brokers in Australia
Here's our list of the top Australian forex trading platforms:
1. Pepperstone Best Forex Broker in Australia 2. eToro Finest Social Copy Platform 3. IG Best Premium Services 4. IC Markets Best for Low Broker Spreads on US/EUR 5. Plus 500 Best for Expert Traders 6. Saxo Bank Best Benefits for VIP Clients
The Best Australian Forex Brokers
Don't get caught up in low-fees, bonuses, flashy websites or advertising that a broker puts out there. It is every traders responsibility to determine how trustworthy and authentic a broker is.
An ASIC regulated broker will ensure you can be confident that your funds will be safe and secure. This will give you more headspace to focus on analyzing the current market environment and create a trading strategy. Finding the right broker can help put you in a more competitive position, and give you a leg up in a complex Forex market.
Keep in mind — some of the following platforms made our list of the best Forex brokers across all jurisdictions. The following list however, is specific to Australia.
1. Best Australian Forex Broker Overall: Pepperstone
Pepperstone offers low Forex and CFD trading fees and doesn't charge inactivity fees.
Pros
Low Forex and CFD fees
Excellent customer service
Copy / Social trading
No inactivity fees or withdrawal fees
Cons
Limited news flow
When it comes to trading Forex in Australia, Pepperstone is one of the best routes you can take. For both beginners and advanced traders, the platform has a lot to offer.
Pepperstone is widely considered a safe platform — and for good reason. It's regulated by two tier-1 regulatory watchdogs: the ASIC and the FCA. Available assets include Forex, CFDs, cryptocurrencies, and commodities. Here are some of the platform's highlights:
Regulated by: ASIC (AUS) and FCA (UK)
Highlight: Low fees
Best suited to: Beginners and advanced traders
Minimum deposit: $200
For most investors, its most attractive feature is the low fees. With Pepperstone, there's no withdrawal fees nor inactivity fees. Through its MT4 Razor account, other fees are as follows:
EUR/USD: $3.76 commission per lot, per trade. Spread cost: 0.16 pips.
GBP/USD: $3.76 commission per lot, per trade. Spread cost: 0.49 pips.
S&P 500 CFD: Spread cost is 0.4 pips.
It's important to note that when compared to other top Forex brokers in Australia, Pepperstone has relatively low fees. Many investors find this feature particularly attractive, but the platform offers additional benefits as well.
For beginners, Pepperstone has a number of educational resources including its own YouTube channel. It also offers a demo account where users can place virtual trades to become familiar with the platform.
Another unique feature of the platform is its social or copy trading capability. Pepperstone offers nearly every copy trading tool you can find, allowing its users to copy the trades of professionals.
Pepperstone's customer service is also top notch. They can be contacted via phone, live chat, email, or on social media. You'll be able to find a representative who speaks English, Russian, Vietnamese, or Thai. They're also very quick to respond — in our own hands-on Pepperstone review, we tested their live chat function and received a helpful response in under a minute.
First launched in Tel Aviv in 2006, eToro quickly became a social trading phenomenon. Its popular social trading features lets users imitate the actions of more successful traders on the platform. Today, the firm offers access to the biggest combined social network forex, CFD, stock, cryptocurrency and commodity traders in the world, totalling 11 million users, across 140 countries.
eToro lead the way for $0 commission and broker fees, regardless of the preferred asset traded. Instead eToro makes it money on foreign exchange spreads.
Regulated by: ASIC in Australia
Highlight: Social/copy trading platform
Best suited to: Beginners
Minimum deposit: $200
Taking that into consideration, eToro's forex spreads are higher than competitors, starting at 3.0 pips for major currencies and going all the way up to 50.0 pips for exotic currency pairings. Professional traders can open a position with a leverage of 1:400.
Customer support is limited. Users can look for answers on the help section of its site, or alternatively, live chat is available.
eToro's Trading Academy is useful for learning how to trade forex and CFDs where users can utilize an e-course, webinars, and a dedicated education centre.
Disclaimer: eToro is a multi-asset trading platform that offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Past performance is not an indication of future results.
Cryptoassets are volatile instruments that can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.
3. Best Premium Service: IG
The IG online platform offers low fees and superb trading tools.
Pros
Wide range of investments available
Competitive commissions and fees
Advanced platforms and tools
In house and third party research
Quality educational material
Cons
Limited product portfolio
High stock CFD fee
Steep inactivity fees after 2 years
Founded in 1974, IG is highly regulated across six tier-1 jurisdictions, making it a safe bet for forex brokers. IG provides a superb offering of trading platforms and tools with widespread functionality that serves traders of all levels.
IG's sheer size allows it to offer competitive pricing all round on all products with a particular highlight being its active traders prices accessible to traders with Forex Direct accounts.
Regulated by: ASIC
Best suited to: Advanced traders and market professionals
Minimum deposit: $300
Traders can utilize a comprehensive and quality selection of market research provided from both the company's in-house experts including IGTV, and third-party providers. For example, traders can benefit from Real Vision TV, premium research for those with $5,000 or more in an IG account.
Customer service is another highlight of the broker with an average waiting time of under 1 minute, and professional and helpful support provided. For more info, our IG review has you covered.
4. Best for Low Broker Spreads on EUR/USD: IC Markets
The IC markets trading platform comes with excellent trading tools and provides superb customer support.
Pros
Several customer support awards
Competitive spreads
Beginner friendly educational material
Leverage of up to 1:500.
Cons
Limited research tools
Founded in 2007, IC Markets (International Capital Markets Pty Ltd) is based in Kent Street Sydney, NSW, along with another in Limassol Cyprus. Advanced and experienced forex traders are best suited to IC Markets with an offering of the lowest average spread out of competitors, advanced trading platforms and offers quick execution. Other attractive offerings include a leverage of up to 500:1, no deposit or withdrawal fees and competitive commission of $3.50 per low.
Regulated by: ASIC and FSA
Highlight: Lowest average spread available
Best suited to: Advanced & Beginner traders
Minimum deposit: $200
IC Markets offers some limited research tools and educational material is for forex traders, including a blog outlining fundamental and technical analysis, third party content from trading central, ZuluTrader for social/copy trading, an economic calendar, and Myfxbook news headlines.
Those looking for some face to face support can visit IC Market's office in 306 Kent Street Sydney, NSW 2000. The team is also contactable through email, skype and by phone, for CFD traders.
Customer support is contactable 24 hours, five days a week and the team in Sydney generally respond within 15 minutes, with more complex issues taking a day. Live chat is available for quicker answers.
In addition, IC Markets forex brokerage prioritizes its educational center, which includes articles and videos, and proves to be a good source of information for those starting out.
Plus500 comes with the best tools and offerings for CFD traders.
Pros
Wide range of over 2,500 CFD products, including cryptocurrency CFD
Guaranteed stop-losses
Highly regulated across the globe including by ASIC, FCA, CySEC and MAS
Cons
Lack of educational and research material
Lack of news
Remember that CFDs are a leveraged product and can result in the loss of your entire capital. Please ensure you fully understand the risks involved before opening an account.
Risk Warning: Remember that CFDs are a leveraged product and can result in the loss of your entire capital. Please ensure you fully understand the risks involved.
Plus500 is a CFD provider that's been around for over a decade. The company is regulated in several countries including Australia, the UK and Cyprus. Its trading platform is simple and easy to use but only if you have some serious trading experience. As CFD trading is generally not suitable for beginners, the platform is tailored for expert traders.
Regulated by: ASIC, FCA
Highlight: Customer support
Best suited to: Experts
Minimum deposit: $100
In fact, an Australian CFD report by Investment trends, awarded Plus500 the best platform for its easy to use desktop and webtrader interface, advanced mobile CFD platform, and Security features.
Spread rates vary and are sometimes charged a bit higher than some competitors. However, Plus500 makes up for this by offering 2,500 available CFD products for trading.
When it comes to educational resources and tools, Plus500 offers no educational material. Furthermore, no research material or technical analysis is provided. However, most agree that Plus500's commissions and fees make up for the lack of educational and research offerings.
As far as customer support goes, Plus500 offers clients bilingual, fast and knowledgeable responses. Chat support is available 24/7 in an impressive 16 languages. Even better, the platform is available in over 30 different languages and you can access it online any time you want.
Saxo Bank aims to benefit their VIP clients with the top-notch trading tools and services.
Saxo Bank is a leading retail forex and multi-asset brokerage, established in 1992 and regulated across 15 jurisdictions including Australia, UK, and Denmark.
Traders who can meet the higher minimum deposit of USD 10,000 will benefit from Saxo's advanced trading platforms, over 40,000 instruments, competitive pricing, in depth research, and reliable customer service.
Regulated by: ASIC in Australia
Highlight: Advanced trading platform
Best suited to: VIP Clients
Minimum deposit: Between $600-10,00
Saxo also offers VIP accounts with a minimum deposit of 200,00 and 1,000,000 but if this is too high then IG might be a better option.
Spreads average on 0.6 pips for a EUR/USD pair but the bank does focus on spread-only pricing which has $0 commission fees and is available to all traders. That said, its volume based pricing does charge a default commission of 0.5 pips which could be worth it for active traders.
The in-house research provided by third-party sources creates a quality experience for traders prioritizing research. The customer support offered is up there with the best, with a response time averaging under 1 minute, and overall helpful responses.
Times of Crisis: COVID-19 and the Forex Market
The Forex market can also be susceptible to severe volatility from economic turbulence, which we are witnessing with the spread of the coronavirus. Currently, the market is seeing almost unprecedented highs and lows with the US dollar increasing against the Australian dollar, and other currencies.
While the economic effects of the financial crisis in 2008 were dire, and included a loss of 8.7 million jobs losses throughout, early COVID-19 predictions suggest job losses in the US alone could hit 1 million per month between now until June 2020. A price war has already been unleashed in the oil industry, between Russia, OPEC, and shale producers, due to market contractions. This will put serious pressure on the indebted energy sector, and could cause a cycle of debt-inflation that will affect the world's immense corporate debt.
While it may be too early to predict the global economic effects that the coronavirus will cause, it is strongly looking like we're about to face a repeat of the same consequences. At the least, a recession could be on the cards.
The Forex market in Australia is regulated by ASIC.
The Australian Securities and Investments Commission (ASIC) regulates the Forex market in Australia and has played a part in it since the 1990s. All Forex brokers in Australia must register with ASIC and adhere to strict regulatory guidelines that aim to protect consumers by maintaining a fair and transparent financial environment.
The ASIC works similarly to the Financial Conduct Authority (FCA) which governs the leading Forex trading platforms in the UK. In Australia specifically, there are a number of ASIC-regulated Forex brokers.
Regulation in the Australian Forex Market
Regulation plays a crucial role in the Australian Forex market because, primarily, it helps prevent fraudulent and illegal behaviour. We've seen in the past the drastic effects that an insufficiently regulated market can have on traders. For example, during the U.S financial crisis in 2007-2010, where regulation favored banks and financial institutions, and thus, failed to sufficiently protect the consumer, until it was reformed by the Obama administration in July 2010.
Due to dire examples like this, reputable authorities help to minimize these risks and maintain the integrity and transparency of the Forex market.
Key ASIC Provisions
Here we have outlined some of ASIC's key provisions that regulated brokers in Australia must adhere to.
A Valid License
The ASIC Connect platform can give you info on whether a certain broker has a valid license.
Top Tip: Solely holding a valid AFSL license does not mean the broker is safe or legitimate to deal with. Further research into the company will be required.
In order to offer financial services to clients the broker must hold a valid Australian Financial Services License (AFSL). To check if a broker has a valid license just search for the broker's name on ASIC Connect. Don't think that just because the broker's name appears that it is a safe and legitimate company. This is one of several requirements of ASIC and doing a more thorough company check is the smart thing to do.
An Office in Australia
The broker must have an office based in Australia in order to ensure better accountability and trader confidence.
Periodic Audit Report Submissions
ASIC regulated brokers must submit regular audit reports that require full financial transparency to prevent fraudulent activity.
Segregated Funds
Brokers have to keep their funds in a segregated account to that of clients.
ASIC regulated brokers must provide seamless trading on fast and efficient platforms. They must also aim to resolve customer complaints in a time efficient manner.
All ASIC requirements, including those mentioned above help protect and reduce the risk that traders face when entering the Forex market.
ASIC Regulated Forex Brokers
An ASIC registered broker has an individual ASFL number that you can verify on the ASIC website. Usually, this is placed on the "About Us" page and the homepage of a brokers website.
You'll also find a brief history of all its regulated brokers on the site. This will help you get a better understanding of the company before signing up with them.
How ASIC will Improve Your Trading Journey
ASIC regularly and continuously monitors its registered members, in addition to requiring regular audit reports. This means you don't need to worry about whether or not a broker is currently upholding its standards and actively implementing them.
If any erroneous activity or information does arise, ASIC will launch an investigation immediately. As you can see, ASIC compliance is a crucial factor when determining Australia's best Forex broker.
Creating an Enhanced Customer Relationship
Not only does ASIC monitor Forex brokers, it also aims to encourage and promote confidence in traders. It does this through some of the following initiatives and projects.
A compensation scheme that ensures clients will be compensated in the event of broker insolvency.
Creative projects like MoneySmart, an educational program that aims to help traders of all ages enhance their financial skills.
Trustworthy services to help protect your trader rights such as, reclaiming money in dormant accounts.
Strict codes of practice for traders to become familiar with before trading in the financial market.
An efficient and thorough system to handle customer complaints made against member firms or ASIC staff. Complaints can be filed to ASIC's customer helpline, including fraud and financial malpractice.
Needless to say, ASIC is one of the most respected financial regulators in the world. While other jurisdictions are ripe with scams, ASIC will actually help you learn how to spot a Forex scam.
A Guide to Legal Forex Trading in Australia
What is leverage and margin trading?
A key strategy for Forex traders to make and increase their earning is through leverage. A leverage offered by a broker is the amount they are willing to loan traders.
For example, some brokers offer a leverage of 50:1. This means that if you invest $1,000 the broker will give you $50,000 to invest in your position. To receive leverage, you will need to open a margin account with a Forex broker.
What currency pair is most likely to increase my returns?
There is no straightforward answer to this. The most popular currency pairs include the EUR, USD and GBP. Therefore, the pairs traded most frequently are the EUR/USD, AUD/USD, GBP/USD, and JPY/USD.
Is there a limit to the leverage offered with Forex Australia?
While even the top Forex trading platforms in the U.S. are restricted to a leverage of 50:1, traders in Australia do not have a restricted leverage. However, the majority of Forex trading platforms offer a leverage of up to 500:1.
This can change depending on an individual's account history and the positions you are looking to trade. This makes it harder for new traders to get a high leverage, but it's safer this way.
Why is AUD a popular trading currency?
Like any currency, the AUD's volatility and coverage is what makes the AUD appealing to traders. The exporting of commodities and resources on the Australian commodity can also be easily found, which have a significant impact on the value of the currency, unlike more exotic currencies. When this is combined with price fluctuations of other countries it makes for a strong consideration for Forex traders.
Will I have to pay tax in Australian Forex trading?
Yes, you will. As of 2003, any money made from Forex trading will be taxed in the same way that taxed is paid on profits you make in any other investments or business. It's important to note that when you sign up to a broker you are required to submit your banking and personal information.
When you do this, your account activity will be recorded by the broker, making it risky to avoid filing your taxes. The situation is similar to that of other jurisdictions, such as the premier Forex brokers of Canada for example.
Understanding how to access Australian markets is important for foreign investors as well, with some exceptions being made. Some Australian trading platforms will allow individual and institutional investors depending on category, "The three broad categories ASX uses to delineate market actors or participants with regard to ASX market products are either to designate them as a Market Participant, Principal Trader, or Market Maker."
Only those designated as trading participants can have full access to Aussie markets.
How does Australia tax Forex earnings?
You can find all the information you need about this in the Income Tax Assessment Act, division 755 and subdivision 960 C & D. This Act states that all gains must be reported as assessable income and losses as deductibles. However, these are only recognized when realized.
It's also worth pointing out that unconverted gains or losses are not differentiated between in this act and several exemptions apply that do not consider gains assessable nor losses deductible, for example gains incurred in an earning exempt income. Nonetheless, it is not wise to attempt to categorize these yourself if you do not have a good understanding of the provisions, and so a tax professional is always your best option.
Are bonuses offered in Forex trading?
Yes, bonuses are offered by some Forex brokers during the signup stage to encourage traders to join, but not all offer this and it shouldn't be an important factor in your decision making. Bonuses offered tend to be trading credit, like 10% on top of your deposit, or points that can earn you perks with the broker. If a bonus initially seems enticing to you, make sure you fully understand the terms of this bonus.
Is there a minimum legal age to start trading Forex in Australia?
Surprisingly, there is no minimum age required before Australian citizens can begin trading. But hold on, that does not mean you can trade forex at 12, because to trade Forex you need to have a bank account. And you cannot open a bank account until you are 18, without the consent of a guardian.
Therefore, anyone under 18 will not be able to trade Forex. That said, you can open a practice/demo account which is offered by most brokers.
All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on TheTokenist.io. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.
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Here's our list of the top Australian forex trading platforms:
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