Japan's financial watchdog plans to set up a panel to discuss regulations on margin FX trading, popular among the country's retail investors, sources with knowledge of the matter said on Thursday. Earlier this year the Financial Services Agency (FSA) has floated a plan to reduce the maximum leverage currency margin trading platform operators can offer to investors to 10 times from the current 25 times.
But as the idea did not go down well among FX firms as well as some traders, the regulator is aiming to use the planned panel to make its case for a tighter leverage control, said the sources, who declined to be identified because they are not authorised to talk about the matter publicly.
The FSA said it had no comment on the matter.
Margin FX trading has been popular among Japanese retail traders, sometimes dubbed collectively as "Mrs Watanabe" even though most are men.
Their trading typically reaches 300 to 600 trillion yen ($2.67-5.34 trillion) per month. A big part of that is short-term trading, industry officials say.
FSA is worried that traders' leveraged positions could put not only traders but also margin trade platform operators at risk if currencies move sharply against their expectations.
When Switzerland suddenly abandoned its peg of the franc to the euro in January 2015, it triggered more than 2,000 cases of uncollected balance totalling 3.3 billion yen ($29.3 million), even though very few traded the Swiss franc.
The panel will discuss the need to introduce capital requirements for FX trading firms, which have so far avoided the type of close scrutiny and regulations banks have received, sources said.
Also likely coming to agenda is their risk management, they added. There are more than 50 FX trade firms in Japan.
The FSA plans to hold its first meeting early next year.
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