The trading public faced several new issues in 2018, and cryptocurrency is one of them. Cryptocurrencies have flourished, and regulators have taken a closer look at products. The SEC (Securities and Exchange Commission) scrutinizes bond platforms because of several types of alternatives. Media have also tried to fit into proven models to increase trading volume.
The rise of cryptocurrencies
While cryptocurrency trading volume has slowed following Bitcoin’s crash in the first quarter of 2018, regulatory scrutiny has picked up the pace. There are three types of regulators focus on cryptocurrencies:
- Loose regulatory bodies such as the US Securities and Exchange Commission.
- Closed regulation like in China
- Relaxed rules like in Switzerland.
There are also many ways traders take risks in the cryptocurrency world, which has disrupted many platforms. Futures platforms that added bitcoin futures didn’t have to change much. Cryptocurrency exchanges like Coinbase have had to make significant changes since they initially had no trading platform. It took most of 2018 for many of the wallets arriving in early 2018 to create a trading platform.
The most successful platforms have been those that have added cryptocurrency CFDs (Contract for Difference). This is a value that tracks the movements of an underlying instrument. A bitcoin CFD tracks the trends of bitcoin, and a trader is only responsible for the price change. CFDs also offer leverage to cryptocurrency traders, allowing the investor to potentially borrow capital and use it to enhance their returns. Many forex brokers that have added cryptocurrency CFDs have created a cryptocurrency trading app.
Bond trading platforms
The US SEC recently formed an investigative group with some of its regulatory partners to review the rules used to prosecute corporate and municipal bond trading platforms. The SEC is the supervisory agency that oversees fixed-income products in the United States.
Currently, oversight of digital bond trading varies based on a company’s specific business models and trading. Unfortunately, it increases investors’ risks and creates systematic and unbalanced practices. The SEC’s Market Structure Committee is now assessing the process. There are even specific regulate platforms known as alternative trading platforms. Some are brokers/dealers, while any regulatory body does not restrict others.
Inclusion of forum-based trading
New trading platforms offer testing tools that allow investors to post their trading strategies for others to evaluate. These are also connecte to brokers where investors can execute trades. The problem is the reliability of the trading strategy, which is left to the investor or others on the forum who vouch for the model. It entails some market risk as most of these products are black boxes, meaning the investor does not know what is behind the decision-making process. New regulations will likely be needed to protect investors from black box trading.