Canada’s forex market is interesting and unique. Canada’s forex market is segregated within the country and is regulated differently among the three territories and ten provinces in the country. This has created unique problems for the retail brokerage firms operating within the country according to Managing Director of North America of OANDA, Mohsin Siddiqui.
Strong economy underpins a mature market
Canada’s GDP results are interesting. Looking at the GDP of the various constituent parts of the country we can see that the largest province by far is Ontario. Ontario leads the pack with an 825 GDP figure for 2017. The next two are relatively close to each other in GDP. Quebec and Alberta come in with 417 million and 331 million respectively. British Columbia is the last major player within Canada with a GDP for 2017 of 282 million.
The rest of the provinces all come in at under 100 million dollars worth of GDP. The three territories and the province of Prince Edward Island are all under 10 million.
Canada’s forex market has stable competition and has matured well. Three of the largest brokerage firms are OANDA, FX Ameritrade and FOREX.com, names that are well known to industry players around the world. Siddiqui, who is also the Head of Corporate Development, states that the developed nature of the economy has helped the brokerage sector immensely. He further states that trading in financial markets is part of the popular culture in Canada. This has allowed retail forex brokerage firms an easy entrance to a wide base of informed consumers. Consumers who, more often than not, have significant liquid capital.
He went onto say that forex is not the only trading done on retail exchanges in Canada. CFDs are also popular instruments that many in the industry are offering.
Regulatory shambles not helping
The problem, however, is the regulation. Every province and territory has its own forex regulations. While the Canadian Securities Administrators (CSA) regulate the bulk of financial transactions in the country, forex also falls under the purview of IIROC. IIROC is the Investment Industry Regulatory Organization of Canada and was founded in 2008. It is primarily concerned with the retail investment side which includes retail FX brokers.
There has been much work done to harmonize the various regulations between the various provinces. However, there is not enough, according to Siddiqui. There is much more that can be done to allow various players to compete across provincial lines. This has all been taken on by IIROC.
Many industry leaders feel that any steps taken to harmonizing the regulations between provinces would greatly benefit competition. Currently, the various brokerages need specialized staff to comply with specific regulations from the areas they operate in. This has lead to larger provinces having more options and better competition. If regulations were harmonized, then consumers throughout the country would benefit.