ASIC to ban binary options, cap leverage on CFDs

ASIC to ban binary options, cap leverage on CFDs

The Australian Securities and Investments Commission (ASIC) seeks to ban the sale of binary options and to severely tighten the rules for trading forex and other CFDs, citing an annual loss of over 2 billion USD suffered by retail clients in Australia.

The ban on sale of binary options will be for 18 months, the maximum period permitted under the current legislation.

The new rules for trading CFDs include a proposed maximum leverage for all forex pairs and gold of no more than 20:1, for indices – 15:1, for commodities– 10:1, for equities – 5:1 and for crypto related assets 2:1.

Traders will also be granted a negative balance protection – meaning that you will not get into a situation, where you lose more than you have deposited.

Currently there are 65 licensed brokers, operating on the Australian market, including IG Markets and CMC Markets, which are listed on the London Stock Exchange, FXCM, XM, and the local Pepperstone.

The Australian retail forex and CFD market has more than doubled over the past two years to over 1 million clients, especially since other markets like the European Union and Israel, tightened the rules for selling CFDs and banned binary options altogether.

According to ASIC data last year Australian traders have lost some 490 million USD while betting on binary options and over 1,5 billion USD while trading CFDs.

The regulator points out that a third of all those who were gambling with binary options had an annual income under 37 000 USD, which is well below the the national average.

“For many years ASIC has taken strong action to protect consumers of binary options and CFDs, using the range of regulatory tools available to us. However, we are concerned that consumers continue to suffer significant harm from trading these products”, said Asic commissioner Cathie Armour.

“A complete ban would prevent retail clients from losing money trading binary options. We believe binary options provide no meaningful investment or economic use, and have product characteristics similar to gambling products”, she added.

The regulator will consult the public on the proposed product intervention measures until October 1st 2019.

ASIC gained new product intervention powers back in April.

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