The Benefits of External Auditing for International Forex Firms

DURING its membership of the European Union, the UK has evolved into one of the world’s global financial powerhouses. To this end, Britain is home to the largest foreign exchange centre in the world, at least according to a recent poll of 53 top central banks.

However, it’s arguable that Brexit may threaten this hard-earned status, particularly with similarly impressive financial hubs such as Singapore growing exponentially. In fact, Singapore is now established as the third-largest foreign exchange globally, holding an estimated 7.6% of the total market share.

There’s no doubt that the Singaporean market is becoming increasingly competitive as it continues to grow, while an increasingly stringent regulatory climate is also giving brokers pause for thought. But what are the precise challenges facing international forex brokers in markets such as Singapore, and why can external auditing help to resolve these?

What Challenges Face International Brokers in Singapore and Similar Regions?

The primary challenge facing forex brokers in Singapore is regulation, as unless firms are incapable of remaining competitive without the ability to comply with changing guidelines and legislative shifts.

Of course, this issue is most commonly synonymous with the European forex market, following the release of MIFID II by the European Securities and Markets Authority (ESMA) in 2015.

This much-debated directive has established transparent trading standards for currency and similar financial instruments throughout Europe, forcing national regulators and operators to adapt and comply or risk significant financial sanctions.

Now, while the forex market in Singapore is regulated solely by The Monetary Authority of Singapore (MSA) and does not currently impose any significant restrictions on trading, this is quickly changing as the market grows and attracts a larger number of investors.

More specifically, new regulations are being introduced to account for the subtle differences that can impact on compliance between different markets, while the fact that at least $300 billion worth of forex transactions are conducted in Singapore every day is also creating a scenario that demands more careful and transparent management.

It’s fair to surmise that increased regulation is also impacting heavily on sales and marketing, with the need to declare accurate performance ratios (the average number of losing trades in specific markets) often not conducive to the promotion of highly leveraged and volatile entities such as foreign exchange.

In this respect, brokers need to strike a delicate balance, while international operators must also consider the variations that exist between various markets.

How Can an External Audit Help Such Firms?

In order for brokers to stay competitive in the constantly evolving forex market, there’s a pressing need to first understand the regulatory challenges facing them.

At the same time, they must also leverage technology as a way of transitioning away from manual and resource-consuming operational techniques that may create inefficiencies and a distinct lack of transparency.

One of the best ways for international brokers to overcome these hurdles is to engage in an external statutory audit overseen by industry experts such as RSM.

Not only can service providers like this operate in numerous overseas markets (including Singapore), but they also strive to identify key compliance issues and recommend bespoke solutions that safeguard the stakeholders’ best interests.

By partnering with a service provider that specialises in your precise marketplace, you can also benefit from auditing techniques that have been tailored to meet the very latest regulatory challenges facing brokers.

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