Expect more regulator action on retail brokers -Oanda chief

By Patrick Graham

LONDON, Feb 9 (Reuters) - Online financial trading sites can expect more action from regulators after the introduction of new rules on leverage and client funds in Europe and the closure of FXCM (NasdaqGM: FXCM - news) 's U.S. business, the chief executive of rival broker Oanda said on Thursday.

Speaking to Reuters by phone, Vatsa Narasimha said his brokerage supported moves to reduce the previously huge credit-based leverage given to small retail investors by an industry that has mushroomed over the past five years.

He said Oanda backed proposals by Britain's Financial Conduct Authority to limit leverage for new clients to 25:1, compared to past rates of up to 500 times. London is an important location for brokers due to the city's domination of the global foreign exchange market.

Discussing the removal of FXCM's U.S. licence this week and the subsequent sale of its business there to another broker, Gain Capital (Frankfurt: 58G.F - news) , Narasimha said brokers could expect more pressure from regulators.

"The regulators are doing the right thing. They are going in and taking a look," he said. "I think you will see more actions coming through."

Shares (Berlin: DI6.BE - news) in Britain's major financial betting firms lost more than a quarter of their value when the FCA unveiled proposals for limits on leverage and other industry practices in December.

That followed moves to tighten regulations in other major EU economies and, most importantly, Cyprus, where dozens of brokers are registered to take advantage of a relatively easier regulatory regime.

U.S. regulators on Monday ordered FXCM and its founding partners Dror Niv and William Ahdout to pay $7 million to settle charges it defrauded retail foreign exchange customers. (Writing by Patrick Graham; editing by John Stonestreet)