Exclusive: ASIC Demands All Brokers’ Data in a Dramatic Move

Brokers are asked to provide client numbers, the jurisdictions they are located in, book strategies and more

The Australian Securities and Investments Commission (ASIC) is wasting no time to make use of its newly minted product intervention powers. After last week the parliament in the land down under granted the financial regulator a new set of tools, the watchdog is starting to take action preceding the enforcement of a new framework governing brokers in Australia.

The ASIC has submitted a data collection notice to brokers, asking for a raft of information. Firms regulated in Australia will need to provide to the watchdog all types of info including client numbers before and after December 2017, and by March 2019. The effort also needs to be broken down by client type and jurisdiction of residence, as well as client money held in each jurisdiction.

The document sent out by the ASIC to brokers was seen by Finance Magnates, and we provide a summary of its contents in the paragraphs below.

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European Clients Scrutiny

The data which the ASIC is asking from brokers is suggestive of an assessment on the part of the regulator as to what happened to the market between the end of 2017 and now. With the ESMA event clearly affecting the local industry, the Australian regulator is assessing what that impact has been by looking at a variety of data.

Brokers are asked to also break down client numbers by age, income bracket, account size, and others. The distinction between retail and wholesale clients is also present in the Australian space. However, there is no clarity as to how the regulator is going to be distinguishing between one and the other.

Most notably, brokers are asked to submit to the regulator how many clients they transferred from overseas entities between January 2018 and March 2019.

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Business Insights

Brokers are also mandated to hand over to the ASIC whether their employees’ compensation is tied in any way to the deposits, trading volumes or profits or losses of clients. Turnover for 2017 and 2018 as well as revenues by asset class and product, position details, swap rates, and other details are turning this request into a monstrous data collection exercise for local firms.

If you thought that the European regulators, namely the FCA in November, requested a massive amount of data, think again. ASIC demands information on how is the broker conducting its business – A-book vs. B-book breakdown, how is the firm applying a hybrid model and what are the criteria for clients to be assigned to different books.

Liquidity partnerships, hedging counterparts, white label agreements, referral agents and pretty much every aspect of a broker’s business are not left out of the equation. Brokers are likely to take a protracted amount of time to be able to gather all the data which the ASIC is requesting.

Data-Centric Approach

ASIC’s approach with this data-collection effort is contrasting to the European one, where regulators started to collect data from brokers only after the implementation of the ESMA’s rules.

To the credit of the regulator, this appears to be a much more prudent effort to the consultation period which the European regulators presented to the industry, only to ignore most sensible suggestions on the part of brokers and interested clients alike.

That said, the Australian watchdog is likely to take a data-centric approach when applying its product intervention powers. Whether or not the incredible amount of data which firms are demanded to provide to the watchdog prove to be cause for a reasonable new regulatory framework, remains to be seen.

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