ASIC’s Restrictions on Retail CFDs Trading Come into Effect

Violators might get up to 5 years of prison time or up to AUD 55 million fine.

The Australian Securities and Investments Commission (ASIC) has enforced restrictions on the retail CFDs trading from Monday that limit the offered leverages by the brokers from as high as 500:1 to a maximum of 30:1.

Additionally, the Aussie regulator imposed restrictions to protect the traders by mandating negative balance protections and marketing tactics of offering trading rebates and gifts to new clients.

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The regulations are very much in line with what the European counterpart implemented in 2018. However, ASIC still gives some slack in flashing the risk warnings.

Brokers Are Already Changing Services in Accordance with New Rules

The leverage limitation is expected to drastically hamper the brokers’ business and revenue with lower trading volumes, a trend we have already seen among the regulated European brokers. However, many brokerages Finance Magnates had talked to are welcoming the restrictions

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Australian brokers have already started to update their services ahead of the enforcement of the restrictions. 

ASIC is also very serious about brokers’ compliances with the new restrictions as an individual violator might receive up to five years of imprisonment and corporations might be slapped with pecuniary penalties of up to AUD 555 million. Furthermore, in case of any violations, the product intervention order will be effective for 18 months and might see a permanent ban as well.

Commenting on the ASIC’s preparations in imposing the new rules, ASIC Commissioner, Cathie Armour said: “We will closely monitor compliance with the product intervention order and won’t hesitate to take appropriate action to enforce the order.”

“We are also paying careful attention to changes in CFD providers’ reported holdings of retail client money and any misclassification of retail clients as wholesale clients, which would risk denying them important rights and protections. Protecting retail investors from harm, particularly at a time of heightened vulnerability, is a priority for ASIC.”

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