Indonesia has quietly become a major battleground for some key players in the online trading industry.
Over the last couple of years, we’ve seen XTB, Plus500, and Robinhood all enter the market or start to do so.
But Indonesia has both an unusual regulatory set up and structures CFDs in a unique way that I am pretty sure doesn’t exist in any other market.
What should firms do? We talked to Dedi Prasetyo, Head of Business Development at local derivatives exchange ICDX, to find out.
A lot of TradeInformer readers aren’t based in Indonesia and there’s confusion about how the market works there. It seems like there are two regulators, and also an old regime and a new regime. If you’re a broker offering CFDs or OTC derivatives today, what do you actually need to do to operate properly in Indonesia?
To operate legally, you need the right approvals depending on what you’re offering. In Indonesia, different regulators cover different product categories. Commodity-related derivatives are under Bappebti. Some products also involve Bank Indonesia. And financial products like stocks and indices fall under OJK. So if you want to offer multiple categories – commodity CFDs and also things like stock index CFDs – you need approvals from more than one authority.
If you operate as a market maker in Indonesia, can you offer CFDs like you would in other markets, as an OTC product?
It’s not structured the same way. If you want to be a market maker for OTC products, you need the right OTC licensing. And the broker typically can’t just take the client’s position directly. The broker operates like a clearing house, and the actual counterparty is the locally licensed OTC trader or market maker. So it’s a different model than what people are used to in the UK or other markets.
On the ICDX website I see the GoFX product and I also see OTC. If you’re offering those, are you trading, like on an exchange, with a clearing house? I’m just trying to understand how it’s offered.
Yes, the structure involves registration and clearing. In Indonesia, OTC transactions still need to be registered, and client funds flow through the clearing system. So when a client trades through the broker, the transaction is registered through the exchange infrastructure, and funds are handled through segregated accounts and then moved through the clearing house. For ICDX, the exchange is ICDX and the clearing house is ICH.
I noticed ICDX has introduced smaller-size contracts, like gold, similar to micro and mini contracts at CME or Cboe. Are these getting more popular in Indonesia, and are they mainly designed for retail traders?
Yes, they’re aimed at retail. Indonesia has a big market but it’s dominated by retail traders, so smaller contracts are meant to make products more accessible. The regulators here also tend to be supportive of on-exchange products.
Do you have any sense of how big on-exchange products are versus OTC, and how fast they’re growing?
Compared to OTC, on-exchange volumes are still smaller. The on-exchange volume is around 10% of OTC volume. But growth has been strong since launch around 2019. In recent years, annual growth has been roughly in the 20% to 50% range, with the first year being especially high. So we are getting there.
You also provide access to foreign exchanges like the CME. In Indonesia, do people want to trade US options and futures as well, or do they mostly stick to OTC products and other local exchange-traded instruments?
There is absolutely demand for foreign products, especially for US-stock-type products. If you’re a broker here, you can offer foreign exchange-traded products if you have the right license and if the products themselves are on the regulator’s approved whitelist.
If you look at the UK and US, some companies have onboarded huge numbers of clients by marketing US stocks. XTB, which now has a license in Indonesia, is an example of that. Do you see the same phenomenon in Indonesia?
One member of our exchange has onboarded upwards of ten million users over three years for US stock access. So yes, it’s popular.
Why do foreign firms enter Indonesia, acquire a license, and then take ages to launch or never use it? What mistakes are they making?
I think it often comes down to management decisions and what license they actually acquired. Many firms acquire a broker that only has a basic multilateral or on-exchange license, but their real intention is to offer OTC/CFD products. Upgrading to OTC can take time because it involves collaboration requirements, system checks, and regulatory approvals.
Some firms also restructure after acquisition and replace management, which delays the launch. In practice, sometimes what gets sold is basically the license itself, because the client base may already be gone.
Basically the Indonesian market is not as simple as many of them assume and so they need to make a lot of changes prior to launching. Some firms are able to do that but, as you say, a lot of them are not.
Some firms use the Indonesian license to onboard clients and then shift them to an offshore broker. Is that allowed?
No, it’s not allowed and it’s a bad idea to do it.
Do you think Indonesia will eventually simplify this into one OTC regulatory regime so firms don’t need multiple approvals?
Probably not. The OTC rules are already quite clear, and newer requirements have actually added conditions in some areas. For example, under Bank Indonesia’s newer approach, you may need to wait two years after obtaining the initial multilateral license before applying for certain OTC permissions. So I think the regulators are happy with the status as it is and they are not going to change it.
What are Indonesian retail traders trading most right now?
For futures and CFD-style trading, gold dominates our trading volume. In the OTC volume mix, gold is roughly 60% to 70%, FX is around 20%, and the remaining 10% is things like indices, crude oil, silver, and similar products. If you look at normal investment products, then US stocks are the most popular.
Something I found unusual is that ICDX seems more willing to work with OTC products, whereas in places like the US or Brazil, exchanges are extremely aggressive in lobbying against OTC products and blocking them. Why does ICDX take a different approach?
I think it comes down to the structure. In Indonesia, OTC transactions still have to be registered and connected to the exchange and clearing framework. The exchange and clearing house are involved across multiple schemes, including OTC, on-exchange products, and foreign-board products, because the rules require registration and specific fund-flow and clearing arrangements.
So we are at more of a middle ground compared to most other countries. If you are an exchange and have no involvement in the transaction process, you are going to be less happy about OTC products.
If you were speaking to foreign brokers, what are the most important things they should know about the Indonesian market?
The biggest thing is that the Indonesian scheme is different from almost all other international markets. Foreign firms need to understand the licensing structure, how membership and clearing work, and how products are categorised. If they want to do business properly, they need to line everything up with the full licensing and operational requirements.
Like I said, a lot of firms enter Indonesia thinking it will be similar to other countries for OTC trading. It’s not and you will get tripped up along the way if you assume it is.
