ASIC too seeks to tighten forex regulation

On the same day that FDIC announced its plan to restrict retail forex trading its Australian peer ASIC also announced

On the same day that FDIC announced its plan to restrict retail forex trading its Australian peer ASIC also announced plans to further tighten local forex regulations. ASIC still is considering the most flexbile regulator out there more dealing with fairness of players than with telling them what exactly to do.

The Australian Securities and Investments Commission (ASIC) has proposed a tightening of the rules around the financial requirements for issuers of over-the-counter derivative products.

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ASIC stated that a review of over-the-counter (OTC) derivative products, such as contracts for difference (CFDs) and margin foreign exchange, came about as a result of the increase in interest from retail investors. ASIC stated that in light of this growth it wanted to ensure that issuers had adequate financial resources to manage their operating costs and risks, and that the owners of issuers were committed to the viability of the business.

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“Increasing numbers of mum and dad investors are trading in these complex and risky products and it’s important the interests of all parties are aligned,” said ASIC commissioner, Greg Medcraft (pictured).

“We want issuers to be required to address operational risks with good cash flow forecasting and by holding sufficient liquid funds against losses and expenses that could arise from these risks.”

ASIC’s proposed changes include the requirement that issuers create rolling 12-month cash flow projections, and replacing the current requirements to hold surplus and adjusted surplus liquid funds with the requirement to hold net tangible assets of at least the greater of $1 million or 10 per cent of average revenue. The rest here.

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