ASIC, the Australian Securities and Investments Commission, has announced a change in policy with regard to CFD traders. This change will affect how Australian CFD traders do business, and it’s important to understand what these new regulations mean for you.
In this post, we’ll break down ASIC’s announcement and explain how the changes will impact CFD traders in Australia.
Why the 2021 ASIC CFD Trading Changes
ASIC is imposing tougher regulations to try and combat the high percentage of retail traders losing money. Some new rules include a requirement for Australian CFD brokers to offer products that are only traded on regulated markets and have a minimum margin level of 50%.
ASIC has also placed restrictions on the amount of leverage that can be offered and has introduced a cap on the fees that can be charged. The aim of these changes is to make it more difficult for investors to lose money and to encourage providers to offer products that are more transparent and easier to understand.
Whether or not these changes will be effective remains to be seen, but they are likely to significantly impact Australia’s CFD market.
What Changes Did ASIC Make to CFD Trading?
The changes introduced by ASIC are designed to protect retail traders from the risks of leveraged trading and to ensure that they are aware of the costs involved. The main changes are as follows:
- Leverage limits
ASIC has introduced limits on the amount of leverage that CFD brokers can offer to their clients. The maximum leverage will be 1:30 for major currency pairs and 1:20 for other currency pairs.
- Margin close-out rules
These rules require CFD brokers to close out a client’s position if their margin falls below a certain level. This is designed to prevent traders from sustaining large losses.
- Negative balance protection
This will ensure that traders cannot lose more money than they have deposited with their broker.
- Promotional offers
ASIC has banned CFD brokers from offering any promotional offers that involve trading bonuses or rewards for depositing funds. This is designed to prevent traders from being lured into depositing more money than they can afford to lose.
- Information disclosure requirements
CFD brokers must now disclose key information about their services, including the risks involved in trading, the costs of trading, and the reputation of the broker. This is designed to help traders make more informed decisions about whether to use a particular broker’s services.
How Will ASIC Change Impact the Industry?
ASIC’s new changes to the CFD industry are going to have a big impact. For one, reducing leverage will make it harder to make large profits and losses. This will protect traders, but some individuals who require high leverage (such as automation traders) may choose brokers regulated overseas or even unregulated brokers.
Offshore traders make up 80% of Australia’s trading volume in retail CFDs, and they are more likely to choose a broker that’s not regulated by ASIC. When the FCA introduced leverage caps to the UK (similar levels to the ASIC January announcement), local brokers saw a 6.7% decline in net income. So, it’s likely that we’ll see a similar decline here in Australia. But only time will tell how big of an impact these changes will really have.
What are the Tips for ensuring compliance with ASIC 2021 Regulations?
As we all know, the financial landscape is constantly changing and evolving, which means that investors and traders need to be ever-vigilant in order to ensure they are compliant with the latest regulations. The ASIC (Australian Securities and Investments Commission) is the primary regulator of financial services in Australia, and they have recently released a new set of regulations which will come into effect in 2021.
Here are some tips to help you ensure compliance with the new ASIC regulations:
1. Understand the changes
The first step is to familiarise yourself with the changes that are being implemented by ASIC. Take some time to read through the new regulations and understand what they mean for your trading activities. If you have any questions, be sure to ask your broker or another financial professional for clarification.
2. Review your trading strategy
Once you understand the changes that are being made, you need to take a look at your current trading strategy and make sure it complies with the new regulations. You may need to make some adjustments to the way you trade in order to ensure compliance.
3. Be prepared for increased scrutiny
Under the new regulations, ASIC will have increased powers to scrutinise financial service providers. This means that you may be subject to more investigations and audits than in the past. it is important to be prepared for this and to have all of your paperwork in order.
4. Seek professional advice
If you are unsure about anything, it is always best to seek professional advice. Your broker or another financial advisor will be able to help you ensure that you are compliant with the new ASIC regulations.
By following these tips, you can help to ensure compliance with the new ASIC regulations. Remember, it is always better to be safe than sorry when it comes to financial regulations.
