ASIC proposed today (Tuesday) extending the capital rules for Australian issuers of retail over-the-counter derivatives by five years. It proposed no change to what those rules require.
Instrument 2022/705 sets the financial resources test for every Australian financial services license holder that issues OTC derivatives to retail clients. It self-repeals on 1 October 2027, and the proposal would carry it to 1 October 2032.
The regulator said it had assessed all eight instruments in the consultation as operating effectively, and that they form "a necessary and useful part of the legislative framework."
The test is a net tangible assets minimum of the greater of AU$1 million (about $704,000) or 10% of average revenue. Half of it has to be held in cash or cash equivalents and half in liquid assets.
Above roughly AU$10 million in average revenue the percentage arm binds and the floor does nothing. Below that line, AU$1 million is the price of running a retail derivatives book in Australia, and the figure has not moved since 31 January 2014.
A Floor Set in 2012 and Left There
ASIC wrote the current numbers into Class Order 12/752 and phased them in, at AU$500,000 or 5% of average revenue from 31 January 2013 and AU$1 million or 10% a year later.
The regulator remade that class order in September 2022 without significant changes. The consultation before it drew one submission.
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Issuers also file quarterly projections of cash flows over 12 months, and report to ASIC when they fall through the trigger points the instrument sets.
ASIC Indexed a Different Capital Floor Last Month
On 30 July the regulator said it will raise the net tangible assets thresholds for responsible entities, investor directed portfolio service operators and corporate directors of retail CCIVs to reflect inflation, then index them annually. The change starts on 1 July 2027.
Those thresholds were last updated in June 2013, ASIC said. The retail derivatives figures date from the year after that, and the consultation published Tuesday proposes no equivalent treatment for them.
ASIC built the combined process for instruments it judges can be extended with no further changes, so indexation of the derivatives thresholds would need a separate consultation. Eighteen submissions preceded the responsible entities decision.
The consultation does not say how many license holders the instrument covers, and ASIC has not published a count of retail OTC derivative issuers. Nor does it address whether the AU$1 million figure should be indexed.
The Leverage Caps Expire First
ASIC's product intervention order for retail CFDs, which caps leverage and requires negative balance protection, runs to 23 May 2027. That falls four months before the capital instrument's current expiry and carries no extension proposal yet.
Seven other instruments sit in the same consultation, covering employee share schemes, superannuation disclosure, financial services guides and insurance claims handling.
Only one of them otherwise touches trading: a class waiver exempting futures market participants from aggregate loss limit rules the ASX 24 platform cannot support. It would run to 1 October 2028.
Enforcement against the sector has been running hot in the meantime. ASIC removed or restricted 87 firms and individuals from financial services in 2025-26, up from 58 a year earlier.
CFD cases accounted for about 37% of the record AU$830 million in court-ordered civil penalties ASIC secured over the same 12 months.
Feedback on the extension closes at 5pm AEST on 8 September.
FinanceMagnates.com reported in 2012 that the regime the AU$1 million floor replaced let an issuer operate on AU$50,000. Carried to 2032, the number that replaced it will have stood unchanged for more than 18 years.
