Procedia - Social and Behavioral Sciences 213 ( 2015 ) th International Scientific Conference Economics and Management (ICEM-2015)

Similar documents
Procedia - Social and Behavioral Sciences 156 ( 2014 ) Ingars Erins a *, Laura Vitola b. Riga Technical University, Latvia

Procedia - Social and Behavioral Sciences 156 ( 2014 )

Procedia - Social and Behavioral Sciences 213 ( 2015 ) th International Scientific Conference Economics and Management (ICEM-2015)

International Comparisons of Corporate Social Responsibility

2nd Annual International Conference on Accounting and Finance (AF 2012) Current context of disclosure of corporate social responsibility in Sri Lanka

Procedia - Social and Behavioral Sciences 156 ( 2014 )

Procedia - Social and Behavioral Sciences 156 ( 2014 )

Enterprise risk management and firm performance

New Option Strategy and its Using for Investment Certificate Issuing

Procedia - Social and Behavioral Sciences 156 ( 2014 )

Bankruptcy of Natural Persons in Lithuania: Reasons and Problems

Procedia - Social and Behavioral Sciences 109 ( 2014 ) Analysis of Financial Performance of Private Banks in Pakistan

Available online at ScienceDirect. Procedia Computer Science 61 (2015 ) 85 91

Procedia - Social and Behavioral Sciences 140 ( 2014 ) PSYSOC Assessment of Corporate Behavioural Finance

CONTRIBUTION OF THE EUROPEAN GAMING AND BETTING ASSOCIATION TO THE PUBLIC CONSULTATION ON SPAIN'S DRAFT PRELIMINARY GAMBLING LAW

Procedia - Social and Behavioral Sciences 109 ( 2014 ) Policy-term financing of a business

Backtesting value-at-risk: Case study on the Romanian capital market

A STUDY ON BEHAVIOR OF MUTUAL FUND INVESTORS IN INDIA

ScienceDirect. Detecting the abnormal lenders from P2P lending data

Reputation an Important Element for Automotive Industry Profit?

Procedia - Social and Behavioral Sciences 210 ( 2015 ) Use of Public Debt Mezzanine Instruments in the Czech Republic

Risk management as an element of processes continuity assurance

Japan s Leading All-in Provider of Internet Services. Copyright (C) 2013 GMO Internet, Inc. All Rights Reserved.

Copyright Alpha Markets Ltd. Page 1

Available online at ScienceDirect. Procedia Economics and Finance 15 ( 2014 )

Procedia - Social and Behavioral Sciences 109 ( 2014 ) Yigit Bora Senyigit *, Yusuf Ag

ScienceDirect. Programme management for public budgeting and fiscal policy. Ganna Lytvynchenko a * 27 th IPMA World Congress

ScienceDirect. Did the Czech and Slovak Banks Increase Their Capital Ratios by Decreasing Risk, Increasing Capital or Both?

Available online at ScienceDirect. Procedia Economics and Finance 32 ( 2015 ) Paula Nistor a, *

ScienceDirect. A model of green investments approach

Procedia - Social and Behavioral Sciences 164 ( 2014 )

Establishment of Risk Evaluation Index System for Third Party Payment in Internet Finance

THE CANADIAN FOREIGN EXCHANGE COMMITTEE LE COMITÉ CANADIEN DU MARCHÉ DES CHANGES

Procedia - Social and Behavioral Sciences 205 ( 2015 ) th World conference on Psychology Counseling and Guidance, May 2015

Available online at ScienceDirect. Procedia Engineering 161 (2016 )

Factors taken into consideration by the parties when appointing an arbitrator

THE CANADIAN FOREIGN EXCHANGE COMMITTEE LE COMITÉ CANADIEN DU MARCHÉ DES CHANGES

ScienceDirect. Project Coordination Model

ScienceDirect. The Determinants of CDS Spreads: The Case of UK Companies

INFORMATION REGARDING THE BEST EXECUTION POLICY OF TRIPLE A EXPERTS INVESTMENT SERVICES S.A. (FX and CFD products)

Available online at ScienceDirect. Energy Procedia 58 (2014 ) Renewable Energy Research Conference, RERC 2014

2013 triennial central bank survey Frequently asked questions and answers

GAIN CAPITAL GROUP, LLC (An indirect wholly-owned subsidiary of GAIN Capital Holdings, Inc.) (NFA I.D. No ) STATEMENT OF FINANCIAL CONDITION

Available online at ScienceDirect. Procedia Economics and Finance 32 ( 2015 )

Corporate view on sustainability: a research in the province of Konya Meral Erdirencelebi a *, Abdullah Oktay Dundar b

ESRB RESPONSE TO ESMA CONSULTATION PAPER ON MANDATORY CENTRAL CLEARING FOR FOREIGN-EXCHANGE NON-DELIVERABLE FORWARD OTC DERIVATIVES

MARGIN FOREIGN EXCHANGE

ScienceDirect. Some Applications in Economy for Utility Functions Involving Risk Theory

Multiple regression analysis of performance indicators in the ceramic industry

A Method for the Evaluation of Project Management Efficiency in the Case of Industrial Projects Execution

First oil shock impact on the Japanese economy

Issues of financial literacy education

Richard Olsen The democratization of the foreign exchange market

FOREIGN EXCHANGE MARKETS CURRENCY RISK MANAGEMENT REVISED

ScienceDirect. Statistical Analysis of the Indicators that have Influenced the Standard of Living in Romania During the Economic Crisis

Research Note. Asia-Pacific Derivatives Survey. April 2019

Multifractal Properties of Interest Rates in Bond Market

Company plan ISME January 20, 2017

ScienceDirect. A Comparison of Several Bonus Malus Systems

Global Forex Code and its implementation. M. Rajeshwar Rao, Executive Director Reserve Bank of India

Defining the Safety Integrity Level of Public Safety Monitoring System Based on the Optimized Three-dimension Risk Matrix

SPECULATING WITH FOREX CFDS

Uncertainty and the Transmission of Fiscal Policy

Life Insurance and Euro Zone s Economic Growth

Senee Puangyanee. Rajamangala University of Technology Suvarnabhumi, Phra Nakhon Si Ayutthaya, Thailand. Supisarn Bhakdinarinath

"Transparency International" Lithuanian Chapter ANNUAL ACTIVITY REPORT 2013

IPSAS and the application of these standards in the Romania

Jacek Prokop a, *, Ewa Baranowska-Prokop b

A Few Fields of the Harmonization of Accounting Statements on the Basis of IFRS

Available online at ScienceDirect. Energy Procedia 69 (2015 )

Business School and Center for Accounting, Finance and Institutions, Sun Yat-sen University, Guangzhou, , P.R.China

Responsible Investment in the 21 st Century: Recent Trends and Developments

The evaluation model of a commercial bank loan portfolio

Procedia - Social and Behavioral Sciences 156 ( 2014 )

Available online at ScienceDirect. Procedia Economics and Finance 6 ( 2013 )

CONTRACTS FOR DIFFERENCE

STRENGTHENING FINANCIAL STABILITY EUROPEAN MARKET INFRASTRUCTURE REGULATION (EMIR) OVERVIEW AND INDUSTRY PRIORITIES

Influence of Snake-Bite Effect on Investment Return Rate: Lithuanian Example

Available online at ScienceDirect. Procedia Economics and Finance 39 ( 2016 )

The accounting and tax legislation of the Greek

Standard & Poor s Environmental, Social and Governance (ESG) India Index- during and Post Global Financial Crisis

Procedia - Social and Behavioral Sciences 235 ( 2016 )

Available online at ScienceDirect. Procedia Economics and Finance 12 ( 2014 )

Procedia Computer Science

Available online at ScienceDirect. Procedia Economics and Finance 6 ( 2013 )

Determinants in accounting regulation for Micro-Entities-a Romanian perspective

Page 1 of 5. 1 Interconnectedness, the second primary factor, refers to the degree of correlation among financial firms and

Monetary and Economic Department. OTC derivatives market activity in the second half of 2005

Available online at ScienceDirect. Procedia Economics and Finance 11 ( 2014 )

The Development of Islamic Financing Scheme for SMEs in a Developing Country: The Indonesian Case

KEY CONCEPTS. Understanding Currencies

A monthly publication from South Indian Bank. To kindle interest in economic affairs... To empower the student community...

Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in Canada during April 2013

THE PERSPECTIVE OF E-BANKING IN SMALL BUSINESS BANKING SECTOR

Available online at ScienceDirect. Procedia Economics and Finance 15 ( 2014 ) Paula Nistor a, *

THE NATURE OF THE DERIVATIVE MARKET TRANSACTIONS TRADED IN THE JOHANNESBURG SECURITIES EXCHANGE

Available online at ScienceDirect. Procedia Economics and Finance 24 ( 2015 )

Order Execution Policy. FXCM Asia Limited

OANDA CORPORATION. Consolidated Statement of Financial Condition (Expressed in U.S. dollars) Year ended December 31, 2017

Report of the Survey on Hedge Funds Managed by SFC Licensed Managers. (for the Period 31 March March 2006)

Transcription:

Available online at www.sciencedirect.com ScienceDirect Procedia - Social and Behavioral Sciences 213 ( 2015 ) 552 556 20th International Scientific Conference Economics and Management - 2015 (ICEM-2015) The evidence of social responsibility in foreign exchange brokers activities Irena Macerinskiene a, Andrius Balciunas b, * a,b Mykolas Romeris university, Ateities str. 20, Vilnius, LT-08303, Lithuania Abstract The purpose of this article is to analyze the evidence of social responsibility among the foreign exchange brokers activities. Since socially responsible activities are becoming more and more common in nowadays world, most of the studies in the field focus on social responsibility of financial institutions, whilst there are few studies covering the activities of foreign exchange brokers. While trading in foreign exchange market is becoming more and more popular for retail investors, there is a reason to assess the social responsibility of foreign exchange brokers. In the article, after performing the analysis of previous studies regarding social responsibility in the financial sector, the evidence of social responsibility among foreign exchange brokers is analyzed. For this research the activities presented in the websites of the most popular Lithuanian Forex brokers were compared to the information provided by the largest foreign exchange brokers. It is showed that the largest brokers involve themselves into socially responsible activities more than the popular ones operating in Lithuania. 2015 Published The Authors. by Elsevier Published Ltd. by This Elsevier is an open Ltd. access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Kaunas University of Technology, School of Economics and Business. Peer-review under responsibility of Kaunas University of Technology, School of Economics and Business Keywords: Forex brokers; Social responsibility. Introduction Although the definition of social responsibility was introduced few decades ago, the interest in the field is still gaining momentum, while increasing levels of globalization requires companies to be more socially responsible (Schmeltz, 2014). Common knowledge suggests, that the more resources from the public is taken, the more socially responsible the company should be. This leads to a premature conclusion that, for example, a factory, which heavily * Corresponding author. Tel.: +370-600-11129; fax:+370-5-267-6000. E-mail address: abalci@mruni.eu 1877-0428 2015 Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Kaunas University of Technology, School of Economics and Business doi:10.1016/j.sbspro.2015.11.622

Irena Macerinskiene and Andrius Balciunas / Procedia - Social and Behavioral Sciences 213 ( 2015 ) 552 556 553 polutes the environment should be incorporated into socially responsible activities more than, for example, some kind of a financial institution. On the other hand, financial institutions also have to be active in social responsibility field, since it could help to gain more confidence from their clients which is especially important after the financial crisis of 2008. While the daily turnover in the Foreign exchange market (Forex) is increasing rapidly, according to the latest data from the Bank for International Settlements (2013) in April 2013 it was 5,505 trln. USD, 33,49% more than in April 2010, the interest in currency speculation by retail traders is increasing as well. According to King & Rime (2010), 8-10% of the overall turnover in the foreign exchange market is composed of the trades from retail traders. On the other hand, based on the clients accounts data, percentage of profitable accounts in Q4, 2014 in the largest broker (ex. Japan) FXCM was 30%, while in other brokers, MB Trading, Gain Capital, IBFX/TradeStation, Oanda, CitiFX and Interactive Brokers the percentage of profitable accounts were 28,2%, 29,0%, 31,6%, 35,8%, 43,0% and 44,1% respectively (Interactive Brokers, 2015). Therefore, while the interest in currency trading is increasing, most of the retail traders do not make profits in foreign exchange market. Confidence in the broker s services and transparency is very important while trading in foreign exchange market, since the market is organized as an over-the-counter system (OTC) where the trades are negotiated directly by market participants (brokers, banks, etc.). Moreover, the importance of reliability of broker s activities is highlited by the European Securities and Markets Authority (ESMA) while there are many un-licensed brokers trying to collect trader s money by fraud (ESMA, 2011). Also, the amount of clients losses can lead to a lack of reliability of broker s activities when the broker can be betting against the clients trades by being the second counterparty of a trade. Having in mind that social responsibility is important for the brokers reliability, the problem arises: how do foreign exchange brokers include themselves into socially responsible activities? The purpose of the research is to provide the evidence of social responsibility in foreign exchange market brokers activities. The content analysis method, used by (Basil & Erlandson, 2008, Gautam & Singh, 2010, Lentner, et al., 2015, etc.) is applied for the research. 1. Previous research in the field There are many discussions on how the social responsibility could be defined, therefore for clearer understanding it is reasonable to present the evolution of understanding of social responsibility. Marrewijk (2003) distinguishes three approaches to social responsibility: shareholder approach, in which M. Fridman is usually quoted while saying that social responsibility of a business is to increase its profits. The second approach is stakeholder s approach, where the organizations are accountable to other related persons, not only the shareholders. The third approach is the societal approach, where companies are responsible to the society as a whole. Carroll (1991) composes the pyramid of corporate social responsibility (see Figure 1). Fig. 1. The pyramid of corporate social responsibility Source: adapted from Carroll (1991)

554 Irena Macerinskiene and Andrius Balciunas / Procedia - Social and Behavioral Sciences 213 ( 2015 ) 552 556 As it is seen in Fig. 1, social responsibility is composed from economic, legal, ethical and philanthropic responsibilities. While the foundation (economic responsibilities) means that the company has to be profitable, legal responsibilities are related to obeying the law, ethical responsibilities are linked to transparency, fair conduct, honesty and sincerity (Lentner et al., 2015), philanthropy is related to gaining better reputation through voluntary activity in contributing resources to the community. Lentner et al. (2015) highlights that for the financial sector the emphasis should be put to legal responsibilities. Therefore, for this research the term social responsibility will be used as a company s activity, through which the company is seeking profits legally and ethically and sharing the profits and activities with the society. 2. Research methodology and data There are many researches regarding social responsibility in the banking sector, while Wang (2010) notices that the brokers activities related to social responsibility could be researched more. In the researches it is common to find content analysis for distinguishing whether a company s activities are related to social responsibility. Internet websites are used as the main source of information (Basil & Erlandson, 2008; Gautam & Singh, 2010, Lentner et al., 2015, Tang, 2015). As stated above, the content analysis will be applied for the research. The brokers activities will be identified by the four components of social activity definition as provided in Figure 1. Since most of the trading is done with computers nowadays and therefore most of the traders should use internet connection for placing their trades either through brokers websites, either through special trading platforms, it is assumed that the main communication channel of the brokers activities are their websites on the internet. Therefore brokers websites are chosen as the main source of information for the research, as it was done by Tang (2015), Gautam & Singh (2010). In table 1 the largest brokers (ex. Japan) for retail traders by daily turnover are presented. Table 1. The largest brokers for retail traders, 2011 No. Dealer/Broker Monthly turnover ($ bln.) Daily turnover ($ bln.) 1 FXCM 321 14.6 2 Saxo Bank 232 10.5 3 GFT 200 9.1 4 Alpari 192 8.7 5 Gain Capital 161 7.3 6 IG Group 160 7.3 7 Oanda 150 6.8 8 FXDD 100 4.5 9 FXPro 98 4.5 10 Forex Club 80 3.6 Source: ForexMagnates (2011) As it is seen from the table, the largest one is FXCM, which is followed by Saxo bank and GFT, while GFT was acquired by Gain Capital (fifth broker in the table). It should be noticed that the broker s Alpari activities have been halted because of poor financial situation caused by sharp movements related to abandoning the EUR/CHF exchange rate floor by the Swiss national bank in January, 2015. FXCM, Saxo bank and Gain Capital will be explored in the research as the largest brokers ex. Japan. The socially responsible activities of the above mentioned brokers will be compared with the socially responsible activities by the main FOREX brokers actively operating (having offices) in Lithuania: Admiral Markets, Real Trade, TeleTrade. DNB bank, which offers a retail trading platform DNB trade was excluded, because it provides banking services, Orion securities and LHV Bank were excluded since they specialize more in providing

Irena Macerinskiene and Andrius Balciunas / Procedia - Social and Behavioral Sciences 213 ( 2015 ) 552 556 555 possibilities for trading in the securities market than in FOREX. The broker MRC Markets was not included because it has stopped the activity recently. The websites of the three brokers will be used as the information source for the research. All brokers will be evaluated based on the information they provide in their websites regarding socially responsible activities. The points will be given if there are activities in legal responsibilities, ethical responsibilities, and philanthropic responsibilities fields. 3. Results After performing content analysis, the brokers websites were ranked in terms of the evidence of social responsibility in the brokers activities. The results are presented in table 2 below. Table 2. The socially responsible activities of selected foreign exchange brokers FXCM Saxo Bank Gain Capital Admiral Markets Real Trade Tele Trade Economic responsibilities + + + - - - Legal responsibilities + + + + - + Ethic responsibilities + - - - - - Philanthropic responsibilities - + + - + - Total +++ +++ +++ ++ + ++ Source: authors research based on the websites fxcm.com, saxobank.com, gaincapital.com, admiralmarkets.lt, realtrader.org, teletrade-dj.lt [assessed 2015. 04.25] As it is seen in the table, only half of the brokers provide their financial information, which is very important for the reliability of the company (Wang 2010). Most of the brokers provide information regarding their regulatory questions. It has to be taken into consideration that the regulatory environment for Forex brokers based in the United States is stricter than for the ones which are based in Europe. Regarding the ethic responsibilities, FXCM has Code of business ethics and director, officer and employee conduct which can be accessed in their website while others did not provide any similar information in communication channel. Three of the brokers were included into philanthropic activities, while Saxo bank provides sponsorship for athletes, Gain Capital is a sponsor of Manchester city football club, Real trade sponsors various Forex exhibitions. Therefore a conclusion can be made that none of the brokers are fully involved in social responsibility activities, while none of them scored the maximum possible amount of points. It is noticeable that none of the actively participating brokers in Lithuania provide their financial statements to the public. While it is not mandatory, it could increase the transparency of companies financial activities and reliability. There was seen a great lack of ethics standards provided in the brokers websites while only one of the brokers had them publicly available. Conclusions There is a lack of research in the field of the evidence of social responsibility in foreign exchange brokers activities, while the interest in currency trading is increasing. Moreover the nature of the foreign exchange market and poor performance results of retail traders could lead to doubts regarding the reliability of some foreign exchange brokers therefore it is reasonable to increase the level of companies reliability through the presence of socially responsible activities. Based on the literature review, for this research the socially responsible activities are distinguished into four responsibilities: economic, legal, ethical and philanthropic, while the emphasis has to be given to legal responsibilities. Three largest foreign exchange brokers and three brokers, physically operating in Lithuania, were chosen for the research. The websites of the companies were chosen to perform content analysis, while the brokers socially responsible activities were distinguished into four main responsibilities. It was showed that none of the brokers are

556 Irena Macerinskiene and Andrius Balciunas / Procedia - Social and Behavioral Sciences 213 ( 2015 ) 552 556 fully engaged into corporate social responsibility activities, while the greatest lack is of ethic responsibilities. None of the brokers, physically operating in Lithuania provided financial statements which could lead to lower level of reliability. Half of the brokers were engaged into philanthropic activities, which are mostly related to sports sponsorships. Almost all of the brokers comply with legal responsibilities, which is important for the companies working in the field. In the future, more Forex brokers websites could be analyzed, a methodology to distinguish the level of engagement into particular responsibility could be composed. Therefore it would be possible to see how the engagement into particular activity could lead to the increase of reliability and market size of the broker. References Bank for International Settlements (2013). Triennial Central Bank Survey. Foreign exchange turnover in April 2013: preliminary global results, p. 24. Basil, Z. & Erlandson, J. (2008). Corporate Social Responsibility website representations: A longitudinal study of internal and external self-presentations, Journal of Marketing Communications, 14, 125-137 Carroll, A. (1991). The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders, Business Horizons,July-August pp. 39-48. European Securities and Market Authority (2011) -12-05, p. 4. Available from internet https://www.lb.lt/esma_ispejimas, accessed on 2015-04-23 Forex Magnates (2011). Forex Magnates Q3 2011 retail forex volume survey FXCM world s largest forex broker. Available from internet http://www.financemagnates.com/forex/brokers/forex-magnates-q3-2011-retail-forex-volume-survey-fxcm-worlds-largest-forexbroker/ accessed on 2015-04-23 Gautam & Singh (2010). Corporate Social Responsibility Practices in India: A Study of Top 500 Companies, Global Business and Management Research: An International Journal, 2, 41-56. Interactive Brokers (2015). Percentage of profitable and unprofitable accounts as reported to the NFA Q1 2015. Available from internet https://www.interactivebrokers.com/en/?f=%2fen%2ftrading%2fpdfhighlights%2fpdf-forex.php, accessed on 2015-04-16 King & Rime (2010). The $4 Trillion Question: What Explains FX Growth Since the 2007 Survey? BIS Quarterly Review, December 2010, pp. 27-42. Lentner,C., et al. (2015). Corporate Social Responsibility in the Banking Sector, Public Finance Quarterly, pp. 95-103 Marrewijk, M. (2003). Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion, Journal of Business Ethics, 44, pp. 95-105. Schmeltz, L. (2014). Identical or Just Compatible? The Utility of Corporate Identity Values in Communicating Corporate Social Responsibility, International Journal of Business Communication, 51, 234-258