Foreign exchange market
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Fleeing forex brokers

THE Securities and Futures Commission's (SFC) attempts to clean up the retail side of the foreign exchange business is to be welcomed. It has been estimated that up to 300 companies and an unknown number of representatives offering foreign exchange services are seeking customers in Hong Kong, and, such are the complexities of foreign exchange trading, that the general investor is more likely to get killed than make a killing, metaphorically speaking, in this area.

While it is not possible to legislate against greed - and, if it were, Hong Kong's courts would be full - it is possible to help protect the individual against the adverse consequences of his or her greed. Foreign exchange, like futures, is an area where volatility presents the opportunity for big profits, and losses. The inexpert investor, however, is more likely to experience the negative aspects of this volatility.

Individuals who sign over to foreign exchange outfits the right to trade with their funds are, at best, inviting traders to take risks with their funds, and, where traders are unscrupulous, are simply handing over money that they are unlikely to see again.

Anyone entertaining the idea of handing over their savings to foreign exchange traders should, at a minimum, ensure that the traders hold dealers licences issued by the SFC. In particular, investors should be wary of Macau-based dealers. Such dealers are able to skirt Hong Kong regulations, and while the enclave might appeal to the gambling instincts of some Hong Kong residents, such people might find Macau's casinos offer better odds than its foreign exchange dealers.