The Australian Securities and Investments Commission (ASIC) has received expanded regulatory powers as part of a reform of the country's financial market infrastructure (FMI) laws, aimed at bolstering stability and efficiency in the Australian financial system.

ASIC Gains Enhanced Powers in Australian Financial Market

The Treasury Laws Amendment Bill 2024, which received Royal Assent on September 17, introduces a suite of new measures designed to strengthen oversight of key entities that facilitate trading in Australia's capital markets. These entities include financial market operators, benchmark administrators, clearing and settlement facilities, and derivative trade repositories.

“The new laws ensure we have a fit-for-purpose regulatory regime for critical financial market infrastructure. These enhanced powers help ASIC ensure the Australian financial system is supported by resilient, efficient, and stable FMIs,” Simone Constant, the ASIC Commissioner, commented.

Key provisions of the bill include:

• Introduction of a crisis management and resolution regime
• Enhancement of licensing, supervisory, and enforcement powers for ASIC and the Reserve Bank of Australia (RBA)
• Streamlining of roles and responsibilities between the Minister, ASIC, and the RBA

The legislation also clarifies the scope of the Australian licensing regime for overseas markets and clearing and settlement facilities, while empowering ASIC to establish rules promoting fair and effective service provision by licensed clearing and settlement facilities.

“We are reviewing our approach to the regulation and supervision of FMIs to ensure that we make the most effective and efficient use of our expanded powers,” Constant added. “We will work closely with the RBA and industry to develop and provide information and guidance on the use of our new powers across this multi-year program of change.”

The reforms stem from recommendations made by the Council of Financial Regulators in July 2020, addressing regulatory gaps identified in previous government reports and international reviews. ASIC has announced plans to update its regulatory guidance to assist industry compliance with the enhanced framework, signaling a period of adjustment as the new regime takes effect.

Last month, ASIC initiated a pilot program for a new digital portal designed to facilitate companies' applications for Australian Financial Services (AFS) licenses.

Impact on FX/CFD Brokers

While the new FMI laws primarily focus on broader market structures, they may indirectly affect FX/CFD brokers operating in Australia. The enhanced regulatory powers granted to ASIC and the RBA could lead to increased scrutiny across the financial services sector, including over-the-counter derivatives markets where FX and CFD products are traded.

FX/CFD brokers should be aware that the strengthened supervisory and enforcement capabilities of ASIC may result in more rigorous oversight of their operations, particularly in areas related to market integrity and consumer protection.

While primarily aimed at critical market infrastructure, the new crisis management and resolution regime sets a precedent for stronger intervention powers that could extend to other areas of financial services in the future.

Clarifying licensing regimes for overseas entities may also affect FX/CFD brokers with international operations or those considering entering the Australian market. These firms may need to reassess their compliance with the updated regulatory framework to ensure they meet any new requirements for providing services to Australian clients.

Recently, the Australian regulator expressed concerns that some derivative issuers of CFDs may be offering “margin discounts” to retail clients with opposing long and short contracts in contravention of ASIC laws.