2018 — Cryptocurrency Craze
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And so, we finally reach the year that were in… and what a year it’s been!
Right at the start, brokers had to deal with the arrival of MiFID II. In light of the regulatory mistakes that had been made over the years, the main focus of the new directive was to ensure that there was switch to full transparency.
Brokers had to provide much more detailed reports, with required information going from 24 fields all the way up to 65, including execution venues, whether any third parties were involved in executing the trade and if they had the authority to do so! This gave clients so much more protection with regards to what liquidity providers the brokers were using!
Introducing Brokers also came under fire, with different commission schemes being put in place as revenue sharing schemes were deemed to be against the best interests of the traders. IBs were also then required to provide extra services to their clients like education and other services beyond what they already had in place.
ESMA, not to let a sleeping dog lie, then stepped back into the limelight by enforcing changes to the minimum leverage offered to retail clients. In light of the 2015 SNB event and other events over the years, ESMA moved to place a leverage cap across the EU. The maximum leverage was reduced to 1:30 for FX, 1:20 for Indices and Gold, 1:10 for other Commodities and 1:15 for Shares. It also became a requirement that brokers always offer negative balance protection to their clients.
Running alongside all of the regulatory changes that the year has seen we have a huge number of geopolitical events affecting the market. One of the main influencing factors would be the infamous @POTUS account!
Over the last year, President Trump’s Twitter account has had a huge impact on the markets!
On March 29, Trump tweeted that he had “concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state and local governments, use our postal system as their delivery boy, causing tremendous loss to the US, and are putting many thousands of retailers out of business!” Well… quite a statement from the US President, and quite an effect it had. Amazon shares fell by 3.8% over the following session. Amazon had lost $35.5 billion in market cap!
He then kicked off the trade war by stating that “when a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!” And so began the tit-for-tat tariff throwing.
As expected, there were broad reactions across the markets in response to the ongoing saga. As a further $200 billion in tariffs was announced, the Dow was down by 200 points, while Copper also experienced a dramatic drop amid a slowdown in production in China.
In light of the trade war, it’s common for participants to also devalue their domestic currency to mitigate the pressure felt through exports (remember the World Trade Organization’s comments back in 2010?) Well, back in July, and in response to the People’s Bank of China setting their reference rate for the yuan renminbi to 6.7671 to the USD, Trump tweeted “China, the E.U. and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates and the USD gets stronger — taking away our big competitive edge. As usual, not a level playing field…”
Following his outburst, the DXY fell by more than 1%, impacting both currencies negatively as investors anticipated further devaluation.
So, as we round up our look back over the last decade, we can only conclude that a lot has happened over the years. With regulatory changes and macroeconomic events shaping the markets year by year, we can only speculate what’s in store for 2019.
What we are 100% sure of is that we will be celebrating our 10-year anniversary with a spectacular Grand Gala, and would like to cordially invite you to celebrate with us!
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