Nearly two months before ASIC will go ahead with its tougher conditions on CFDs trading, the Australian business of global FX brokerage firm, OANDA is introducing a new professional trading account.
The new account type allows traders to benefit from higher leverage ratios, margin relief and volume rebates. While retail traders are set to be impacted by ASIC’s rule changes, wholesale investors are exempt from the changes around over-the-counter (OTC) CFD trading.
Anthony Griffin, Managing Director of the firm’s Australian operation further explained that the professional trading account enables experienced clients to access 100:1 leverage, margin relief when they place a guaranteed stop-loss order, and volume rebates.
“However, this account is not for everyone. Traders must meet stringent criteria in order to qualify as a wholesale client or sophisticated investor before they can upgrade to the Professional Trading account,” he added.
The regulatory updates, which will include leverage limits and margin closeout rules, is set to take effect on March 29. Additionally, the rules mandate negative account protection, ensuring that customers cannot lose more than their trading stake, avoiding a repeat of the debacle following the 2015 Swiss Franc collapse. Finally, the rules forbid bonuses and other incentives, whether monetary or non-monetary, that may have encouraged overtrading in recent years.
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For brokers, the biggest blow has been ASIC’s decision to limit how much leverage they can offer to their clients to juice up bets. Regulated firms have been forced to limit the leverage they offer to a maximum of 30:1.
The new rules effectively harmonize ASIC’s requirements with product approval requirements introduced in Europe by ESMA, which also banned offering binary options and restricted leverage on CFDs.
But, unlike ESMA, ASIC said it will not require issuer-specific risk warnings or other disclosure-based conditions as originally proposed. In Europe, the CFDs restrictions impose a standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.
OANDA is a multi-regulated broker with offices in Toronto, Europe and the Asia Pacific region. The company operates an FX trading platform utilized by a mix of retail and institutional investors. Moreover, it provides currency information services to individuals, large corporations and portfolio managers.