Elevating the Trading Landscape in Southeast Asia
Thomas Chang, Regional Business Director for the Asia Pacific at Vantage, explores the trading landscape in Southeast Asia and the key areas of trading services that need an upgrade.
Across the Asia Pacific (APAC), there’s a new generation of traders coming through that are young and hungry to invest. These traders are often wealthier and more business-savvy than their predecessors, and with economies taking off and a growing number of high net-worth individuals (HNWIs), the potential for these markets to take off is high.
However, the region is a prime example of an extremely promising market that has historically been overlooked and underserved in terms of financial services available. At the moment, a new generation of brokers and market makers are emerging in Southeast Asia, but standards are still low compared to other regions and there are very few respectable brokers who are both local and have a historic expertise in emerging markets.
It’s time to address the problems in these markets and improve the service available to traders in the region. After all, emerging markets are the future of trading.
The first and most glaring problem is that traders in emerging markets do not have their local needs addressed. Trading strategies and styles differ greatly country-to-country, especially in such a diverse and expansive market as the Asia-Pacific, but rarely do firms tailor their services to meet local needs.
Many traders – particularly beginners – need regular market information to inform their investment decisions as well as guidance on how to use trading tools. If they’re not informed, they simply can’t make the best trading decisions. While a handful of international brokers have expanded into these regions, they rarely have local teams or provide local language services.
Because the pool of resources is more limited in these markets, traders are at a huge disadvantage and need better support to improve their trading outcomes. It’s up to the brokers to act as that valuable source of information and guidance, educating their clients at all levels to make their lives as straightforward as possible.
The right technology
The goal of any broker should be simple: to provide a platform that allows their clients to seize market opportunities. But all too often, brokers enter a new market with the purpose of extracting profit without putting client outcomes first, and then they move on. Unfortunately, because the financial services landscape is less mature, traders in these markets often lack awareness around what best execution looks like – something which scammers have been quick to exploit.
Traders in the region must keep a close eye on execution and slippage to make sure the spreads of their broker is competitive. It’s very possible for them to have access to cutting edge trading, they just need to know what to look for.
Similarly, the range of products and tools in these regions is fast evolving and traders must shop around for the platform that best suits their ambitions. The broker should provide a seamless platform, multitude of management tools, and different local payment options as well as the education and support services. In particular, this region has leapfrogged legacy technology straight to mobile phones so mobile-friendly tools are particularly important.
The challenge of compliance
Finally, there’s the growing challenge of regulation, which needs the attention of government agencies, trading firms and investors. Regulation plays a huge part in protecting investors, but it’s currently complex, particularly for firms entering a new market. All of these markets have different rules and regulations when it comes to trading, which is likely to become increasingly difficult as regions evolve and grow in sophistication.
Most brokers don’t have the experience of operating in a number of different regulatory environments, meaning they don’t understand compliance in these varying markets and cannot anticipate potential challenges. That means the established trading firms either don’t bother to enter the market or can enter and risk breaking compliance. As a result, many of the brokers in the APAC region are unlicensed, putting investors at risk in a whole range of ways.
To stimulate a secure investment ecosystem, regulators should provide crystal clear guidance to first entering the market while firms should take a diligent approach to compliance to avoid fines. From the trader’s perspective, they must be careful to ensure the broker they work with has the appropriate regulation. That way they can be sure that their funds are safe.
Trading in these markets is taking off. Although there’s a lot of progress to be made if the trading services are to catch up with the likes of the UK and US, but we’re moving in a positive direction that could prove just as fruitful for investors as it is for brokers. It’s an exciting time that will open up equal investment opportunities to those who previously haven’t had access.