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.
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 Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. Read this Term 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.
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.”
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.
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 Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. Read this Term 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.
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.”