ASIC’s Product Intervention Calls for Reduced Leverage and Negative Balance Protection in Australia
Starting on March 29, forex brokers in Australia must reduce the leverage offered to their clients, one of several changes which are part of ASIC’s recent product intervention.
The Australian Securities & Investments Commission, commonly referred to as ASIC recently announced significant changes regarding the regulation of forex and CFD products in Australia. The announcement, officially referred to as 20-254MR ASIC product intervention, will enact changes that were anticipated for at least a year by the forex & CFD trading community in Australia.
How will forex regulations change in Australia after this recent decision by ASIC? There are 3 main updates to forex regulation in Australia which come into effect starting on March 29, 2021.
ASIC’s Product Intervention Calls for Reduced Leverage in Australia
One of the most significant changes introduced by this product intervention centers on the reduced leverage that ASIC licensed brokers will now be subject to. Previously, forex brokers in Australia were able to offer up to 500:1 leverage. Starting in March, the maximum leverage that ASIC regulated forex brokers will be allowed to offer is 30:1 for major FX pairs.
The leverage not just on the major FX pairs is set to be reduced but also the minor pairs and CFDs. For example, leverage on minor FX pairs, gold, silver and major stock indices has been reduced to 20:1. Commodity CFDs and minor stock market indices will see a reduction in leverage to 10:1 with 5:1 for single share CFDs. Finally, CFDs in cryptocurrency will have a maximum leverage of 2:1
Per ASIC’s Product Intervention Australian Forex Brokers Must Now Offer Negative Balance Protection
In addition to the across the board leverage reduction, ASIC will also require all licensed forex brokers in Australia to offer negative balance protection to their clients. Not only must brokers now pay attention to client balances, they must also review their margin call policy in order to prevent further client losses when account balances reach dangerous levels.
Deposit Bonuses, Credits and Other Promotions are Now Prohibited in Australia
The final aspect of this ruling was to eliminate the type of promotions that aim to increase retail trading volume. Starting on March 29th, ASIC licensed forex brokers will be prohibited from offering deposit bonuses or other types of trading credits to clients. Furthermore, prizes in the form of product “give aways” and other incentives are no longer allowed.
Due to the changes introduced in this product intervention, forex brokers are now researching alternative licensing jurisdictions that will offer more flexible leverage. If your broker is looking to explore offshore or other forex broker license jurisdictions with less restrictive policies, Atomiq Consulting is the ideal partner to assist you.
To learn more about obtaining an offshore forex broker license, don’t hesitate to contact our team of consultants today. Our team of industry professionals will be happy to guide your broker in selecting a jurisdiction that best meets your broker’s specific needs.
