Increasing volatility in the financial markets worried the Australian Securities and Investments Commission (ASIC). It reminded issuers to remain vigilant. The Australian regulator sought to increase their number of measures in place against higher than normal volumes in trade.
To emphasize the importance of having business continuity plans, the watchdog asked firms to review, update, and test plans. They should also incorporate new information and address emerging challenges with back-up arrangements and stress testing.
Reviewing current risk management systems were also advised in an email from its Market Supervision, OTC Intermediary Compliance Team. Firms should consider their human and technological resources, such as location, capacity, and internet load.
ASIC surveyed some retail OTC derivative issuers for information on how they’re handling the pandemic. Businesses faced questions about their risk mitigation measures among questions related to the crisis.
The organization’s questions weren’t anything too difficult, a director at Sophie Grace and TRAction Fintech said. Sophie Gerber believes ASIC’s measures were a good opportunity to review in-house systems and processes such as stress testing.
What Worries the ASIC?
Press coverage of the coronavirus worried ASIC with economic disruption this week, causing plenty of volatility in the industry. Commodity-linked currencies like the Australian dollar, New Zealand dollar, and the Canadian dollar simultaneously posted sharp declines in early trading.
Volatile swings in forex markets prove prominent struggles for both brokers and traders. Many brokers suffered the same fate in June 2016 when customers’ demand began to diverse.
History also proved that shocking events like this could cause financial harm to forex brokers. These usually lead to clients receiving margin calls to positions closed out with a negative balance.
Large changes in major currencies also disrupt the forex markets, therefore harming brokers in the long run. Many firms lost hundreds of millions in losses when the Swiss National Bank loosened its currency’s interest rates back in 2015.