This Monday marks the new CFD restrictions that ASIC has put into practice. The Australian Securities and Investments Commission has introduced new restrictions on retail trading of CFD, the most important of which is the newly integrated leverage cap of 1:30, which closely mirrors the decree issued some years back by Europe’s ESMA.
The watchdog additionally mandated a requirement for a negative balance protection policy across all local brokers. Furthermore, the new regulations push brokers to adapt rebates and gifts to clients.
Aussie brokers were renowned for the high leverage offerings, which at times could go all the way up to 1:500. The new leverage cap is sure to hamper some companies whose main business revolves around the fluidity offered by a higher leverage. What’s worrying is the fact that certain firms with lower revenues and trading volumes will be and the forefront of the inevitable consequences brought by these new restraints.
Not complying with the new rules can lead to some devastating consequences. ASIC has forewarned brokers that individual violators can face up to 5 years in prison, while institutions not abiding by the rules can be fined a very serious fine of up to AUD 555 million. Product intervention orders are also considered as punishment, with the possibility of a permanent ban on products that violate the requirements.
Brokerages in Australia have already started updating their services and terms accordingly.