The Australian Securities and Investments Commission has just issued a new consultation paper directed at forex and CFDs brokers. The regulator is focusing on the new proposed client money rules that holders of Australian Financial Services (AFS) licenses will need to apply for from April 2018.
The providers of ‘derivative retail client money’ will need to implement changes to the ways they are handling client money in accordance with the Corporations Act.
ASIC highlights that the new client money rules will impose record keeping, reconciliation and reporting requirements on AFS licensees that provide forex and CFDs trading.
The regulator is proposing that the client money rules apply to all derivative retail client money received by an AFS licensee. There is a proposed exception, for funds that are used to cover exposure on a derivative that is traded on a fully licensed domestic market, like the ASX 24.
Australia-regulated companies are invited by the regulator to provide feedback on the new rules in the coming weeks.
Client Money Changes Crucial to Industry
The proposed changes are designed to prevent the use of client money by brokers for their own needs. Australian industry insiders have expressed concerns about the operation of straight-through processing brokers. They require the use of client money to hedge market exposure of clients and will instead need to use their own funds for collateral with their prime brokers.
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ASIC will also get the power to enact new client money reporting rules to ensure greater transparency on the market. AFS licensees will need to report in detail the receipt and use of derivative retail client money.
Commenting on the matter, ASIC Commissioner Cathie Armour said: “The client money rules will apply more formal and consistent standards across the derivatives sector and will ensure any discrepancies in an AFS licensee’s client money account are notified to ASIC in a timely manner and that ASIC is able to take appropriate action.”
“We look forward to continued engagement with industry as licensees now work through the application and detail of the rules,” she added.
Following is the full consultation paper as provided by the Australian regulator: