ASIC regulatory changes
Important information for account holders
The Australian Securities and Investments Commission (ASIC) has imposed restrictions on marketing, distribution and sale of leverage trading products to retail clients from 29th March 2021.
The key changes are:
New Margin Rates |
|
|---|---|
New Protections |
|
| Negative balance protection has been applied, preventing you from losing more than the balance in your account. | |
| A standardised margin close-out level of 50% of the total margin required for all open CFD positions has been applied to your account. | |
| Certain promotional inducements such as rewards or gifts are prohibited (information services and educational tools are excluded from this). |
City Index is supportive of protecting retail clients and have successfully implemented similar measures in other jurisdictions.
If you have any questions about ASIC’s planned changes, we recommend you review our FAQs below or contact our client services team who will be on hand to help. If you wish, you can also view ASIC’s full statement.
FAQs
- Who do the rules affect?
- What are the margin rates?
- When were retail clients affected?
- What is ASIC?
- Why were new regulations introduced?
- What new protections do retail clients benefit from?
- What other changes affect retail clients?
Q1) Who do the proposed rules affect?
Only retail clients are affected by the new measures. Retail clients also have the option to apply for professional client status.
Q2) What are the margin rates?
The measures introduced for retail clients are as follows:
Maximum leverage limits on new positions:
- 30:1 for CFDs over major currency pairs (3.33% margin);
- 20:1 for CFDs over minor currency pairs, gold or a major stock market index (5% margin);
- 10:1 for CFDs over commodities (excluding gold) or a minor stock market index (10% margin);
- 5:1 for CFDs over shares or other underlying assets (20% margin); and
- 2:1 for CFDs over crypto assets (50% margin).
Q3) When were retail clients affected?
29th March 2021.
Q4) What is ASIC?
The Australian Securities and Investments Commission (ASIC) is an independent Authority that contributes to safeguarding the stability of the Australian financial system by enhancing the protection of investors and promoting stable and orderly financial markets.
This is achieved by: Assessing risks to investors, markets and financial stability; completing a single rulebook for AU financial markets; promoting supervisory convergence; and directly supervising specific financial entities.
Q5) Why were new regulations introduced?
ASIC has adopted new measures on the provision of CFDs with the aim of increasing consumer protection across Australia by ensuring a common minimum level of protection for retail investors within the CFD market.
The measures were introduced industry-wide, meaning all CFD providers servicing clients in Australia need to comply.
Q6) What new protections do retail clients benefit from?
- Standardised Margin Close Out Rule: If your margin level reaches the standardised margin close out (MCO) level, for example 50% (i.e. 50% of minimum required margin to cover your open positions), we are required to close any or all of your open positions as quickly as possible; this is to protect you from possibly incurring further losses.
- Negative Balance Protection: Your account will have negative balance protection applied, meaning that your losses cannot exceed your deposits.
Q7) What other changes affect retail clients?
- A prohibition on firms offering monetary and non-monetary benefits (excluding research and information tools).