New Zealand is a politically and economically stable country, with a current population of 4.8 million people and a gross domestic product (GDP) of US$205 billion for 2018. The country’s economy is based on free-market principles. New Zealand has well-developed manufacturing, tourism, and service sectors that complement the leading agricultural sector.
The Land of the Long White Cloud, as the indigenous Maori population dubbed it, is famed for its spectacular landscapes that provided the backdrop for epic movies like those from the Lord of the Rings trilogy. Apart from being the home of Frodo Baggins, the country is a strong player on the foreign exchange markets.
Since its economy relies mostly on the exports of commodities and agricultural products, New Zealand’s overall economic performance is closely dependent on commodity prices. The amount of money paid for exports from this region rises in parallel with the increase in commodity prices, which helps the country generate higher GDP. The latter is a strong indicator of good economic performance and as such, can lead to the appreciation of the local currency, the New Zealand Dollar (NZD).
New Zealand currently boasts a thriving and regulated Forex trading sector but this has not always been the case. The local foreign exchange market took a significant hit due to the innumerable financial frauds the country witnessed in the early 2000s.
Moreover, the country’s financial regulatory framework was rather inadequate at the time where addressing financial scams was concerned. All this changed in May 2011 when New Zealand’s government acted on its shortcomings by introducing a brand new regulatory body that turned out to be far more effective in overseeing the local foreign exchange market.
New Zealand Forex Legislation
Forex trading is completely legal in the Land of the Long White Cloud. Brokerages operating in this island country are regulated by the local watchdog, the Financial Markets Authority (FMA). Brokers need authorization from this entity before they can start offering legal services to traders from this jurisdiction.
FMA-registered brokerages are under constant scrutiny by the watchdog to make sure they conduct their business legitimately, transparently, and responsibly. Those who fall short of following the strict regulatory guidelines in the country face various penalties including fines and license revocation. Traders can check whether or not a given brokerage is locally authorized by viewing the official FMA register.
Investors from New Zealand can legally trade a variety of financial instruments, including currency pairs, shares, soft and hard commodities. The speculation on price movements by purchasing contracts for difference (CFDs) is also allowed under the laws of this jurisdiction. It is possible to legally buy CFDs for various instruments, including Forex, commodities, indices or shares.
There is no need to purchase the underlying assets when trading CFDs. This is a leveraged instrument, which enables the brokerages’ customers to trade with more capital than they have initially invested. The leverage can significantly increase their gains or losses, which makes the CFD a highly volatile instrument to trade with.
Unlike other countries such as Australia and the UK, New Zealand has not yet introduced specific restrictions on the maximum leverage issuers of derivatives can offer to local traders.
After numerous complaints from losing retail traders, the FMA announced in 2017 that businesses must acquire local derivative licenses before they can legally offer short-term leveraged products settled within three days to customers based in New Zealand.
The new requirement came into effect in December 2017 and applies to all brokers, regardless of whether they are based in the country or abroad. However, the regulatory authority did not mention any restrictions on leverage or bonuses. The FMA only specified that standard spot Forex contracts are exempt from compliance with these rules.
Trading with binary options is also legal and regulated by the FMA. To obtain a license, binary options brokers must fulfill specific requirements. For example, they must have physical offices in the country and protect their customers’ funds by storing them in segregated accounts. Licensed brokers must carry out internal assessments of their compliance levels and provide reports to the regulator so that it can conduct its own assessment.
New Zealand Financial Regulators
There are several financial regulators in New Zealand, starting with the Financial Markets Authority (FMA), responsible for the oversight, licensing, and penalization of foreign exchange brokerages that service traders from the country.
The FMA was introduced in May 2010 by former Commerce Minister Simon Power after severe public criticism over the failures and incompetence of the now-dissolved regulatory body, the Securities Commission of New Zealand. One of the main objectives of the FMA is to aid the development of transparent, safe, and efficient financial markets.
This authority ensures all New Zealand Forex brokerages adhere to its strict regulatory guidelines. Those who fail to comply are penalized by the regulator, usually through fines or license revocation in the more severe cases.
The FMA also acts as an intermediary in cases of disputes and performs regular audits on locally regulated brokerages. One of the downsides of trading in this jurisdiction stems from the absence of investment compensation schemes to protect New Zealand traders against the possible liquidation of the brokerages.
All providers of financial services, including brokers and currency exchange dealers, should be registered on the Financial Service Providers Register (FSPR). Finally, there is the Financial Services Complaints organization, or FSCL, where both brokerages and local traders can file documents to make complaints, claims, and suggestions.
This is an independent scheme for dispute resolution that has been given the thumbs-up under the Financial Service Providers (Registration and Dispute Resolution) Act of 2008. The FSCL deals with all sorts of complaints related to financial services, including foreign exchange, card services, insurance, and money transfers.
New Zealand Forex Payment Methods
Many brokers that accept customers from New Zealand allow them to make payments in their local currency, the NZD. As for the supported banking methods, traders from the country can usually fund their live accounts with Visa, Mastercard or Maestro.
International and domestic bank transfers are an alternative for Kiwis who are averse to using their cards for online trading activities. Bank transfers are not suitable for traders who insist on time-efficiency because they require several business days to complete.
All major New Zealand-friendly brokers support payments with digital wallets, such as Skrill, PayPal, and Neteller. Traders must transfer some money to the balance of their virtual wallet, usually from their bank account, credit or debit card. This enables them to conduct confidential and highly secure deposits directly through the platform of the digital wallet.
One method that is particularly popular among traders from New Zealand is POLi. This payment solution enables Kiwis to top up their trading balance directly through the online banking platforms of their banks.
POLi only acts as a mediator between the parties involved in the transaction. It facilitates quick and completely secure money transfers without the need of traders going through a registration process. The transactions take place in real time, which makes POLi an incredibly time-efficient deposit solution.
It is worthwhile mentioning that Kiwis looking to use POLi must hold accounts with one of its associated banks in New Zealand. These include Kiwibank, TSB Bank, Westpac, the Bank of New Zealand, ANZ Bank, and ASB Bank.
Before initiating a deposit, New Zealand traders must check their chosen brokerage’s minimum deposit requirements. Opening a live account requires a deposit of at least $100 in many cases. Each brokerage has its individual recommendations on the minimum capital required to start trading. Most retail traders from the country invest between $1,000 and $100,000 into the foreign exchange markets.
The margin is another important thing to consider. This is the minimum amount a trader must have in their live account before they can open a new position. The difference between the available balance of the account and the trade’s full value is “borrowed” from the brokerage.
If the account’s equity drops below the margin requirement prescribed by the brokerage, the trader is sent a margin call, in which case, they must either refill their balance with sufficient funds or liquidate their open positions to restore the account’s equity to the acceptable level.
Popular Trading Software in New Zealand
New Zealand-friendly brokerages offer their clients a mixture of proprietary and third-party software. A good New Zealand broker would give local traders the option to test their platform in demo mode before they venture to invest real money.
The platform should be intuitive enough and equipped with various additional features traders can use for technical analysis and strategy testing, such as customizable charts with technical indicators, multiple timeframes, and graphical objects that can be imposed on charts.
Some proprietary platforms support copy trading, which enables customers to copy the positions of selected well-versed investors. The entire process is automated. The software links some of the funds of the copying trader to the account of the person they copy.
Thus, the actions of the copied trader are executed in the account of the copying trader, including opening/closing a position and setting Stop Loss/Take Profit orders. The copied traders usually earn additional profits the more people follow them and copy their trades.
Two of the most popular third-party platforms are those developed by MetaQuotes and Spotware Systems. MetaQuotes is the company behind the development of the world’s most popular trading platform, MetaTrader 4 (MT4).
MT4 was launched in 2005 and quickly became the preferred platform of beginner and seasoned traders worldwide, largely due to its intuitive design. The platform was designed specifically for foreign exchange trading.
Many continue to use it to this day despite its slightly outdated interface. MetaTrader 4 also features various cool functionalities that appeal to skilled traders, including 9 timeframes, a built-in email system, a single-tread strategy tester, hedging, 31 graphical objects, and 30 technical indicators. The platform also supports hedging for better risk control.
Kiwi traders looking for more functionalities and instruments should sign up with brokers that implement the newer version of the MetaQuotes software, MetaTrader 5. It allows for trading with Forex, stocks, options, commodities, bonds, and futures. Here you have unlimited symbols, a multiple-tread strategy tester, 21 timeframes, 44 graphical objects, 38 technical indicators, an email system with attachments, and an economic calendar.
The depth of market tool shows you the number of open buy and sell orders for a specific currency or security at various prices. This tool practically measures the supply and demand for different securities and currencies.
Some ECN brokers that service the New Zealand market prefer to implement the cTrader platform of Spotware Systems. This is a more modern platform that stands out with an appealing design, something very important considering some traders spend hours staring at charts and analyzing market trends. The platform comes with various charting tools and supports copy trading.
Mobile Trading in New Zealand
With 81% of the country’s population owning a smartphone, New Zealanders seem to use mobile devices for online browsing at least as often as they use desktop computers. Moreover, the country has an average 4G speed of around 18.7 Mbps, ranking in 17th place on a global scale according to a survey conducted by the mobile analytics company Opensignal.
Kiwis looking to execute their trades on the go should bear in mind mobile trading requires a reliable and stable connection. Most Forex brokers that service the New Zealand market offer applications for the two most commonly used mobile operating systems, Android and iOS.
The app you choose should meet your individual preferences and objectives as a trader. Well-versed traders tend to prefer fast and reliable apps that feature advanced analytical and charting tools. Kiwis new to trading generally tend to lean toward accessible and easy-to-use applications that provide them with hints on how to execute successful trades.
In essence, the apps mirror the experience on desktop. Traders can set up demo accounts where they can practice and improve their knowledge without any risk. Demo accounts are also good for mobile users looking to test new strategies on the fly.
Other important features the apps of most New Zealand-friendly brokers support include multiple types of charts, customizable watchlists, drawing tools, and many indicators for technical analysis. The exact features are app-specific, however.