Australia restricts Forex / CFD leverage to 1:30

Australian regulator, ASICat the beginning of 2019, he informed about plans to introduce changes to the regulations there Forex market. Just 4 days ago we mentioned that the changes are getting closer. So it happened. We already know what has been decided and what the fate awaits Australian brokers and their clients.

Leverage limited to 1:30

The main "novelty" is primarily the introduction of a product intervention similar to the one we know from Europe (#ESMA). The most important change is the introduction of restrictions on leverage. So far, Australian brokers have been offering 1: 100 or more leverage without any problems, regardless of the type of instruments. Now the maximum is 1:30.

New Leverage Levels:

• • Major currency pairs - 1:30
  • Other currency pairs - 1:20
  • Major stock indices - 1:20
  • Other stock indices - 1:10
  • Gold - 1:20
  • Commodities other than gold - 1:10
  • CFDs on stocks and other instruments - 1:5
  • Cryptocurrencies - 1:2

Major currency pairs are defined as pairs of min. of the 2 currencies listed: AUD, GBP, CAD, EUR, JPY, CHF and USD.
Remaining currency pairs are any currency pair that is not a major currency pair.
Major stock indices are the CAC 40, DAX, Dow Jones Industrial Average, EURO STOXX 50 Index, FTSE 100, NASDAQ-100 Index, NASDAQ Composite Index, Nikkei Stock Average, S&P 500 and S & P / ASX 200.
The remaining stock index is any stock index that is not a major stock index.

Debit protection

Another new feature is the introduction of negative balance protection for retail clients. There is no information about the overdraft limit.

No bonuses or prizes

Like ESMA, it was also decided to prohibit the offering of deposit bonuses and non-cash rewards that could lead to excessive risk taking by traders.

No risk warnings

One of the differences in relation to the product intervention known from Europe is the lack of compulsion and standardization of risk information and the lack of quarterly information on the percentage of losing customers.

binary Options

Unlike European regulators, ASIC has decided at this stage that binary options are still legal in Australia. However, the idea of ​​banning this instrument is still under consideration - either entirely or only for retail clients.

Time to introduce the intervention

The changes take effect from March 29, 2021 and are temporary. The product intervention will last 18 months and after this period ASIC will decide whether to maintain the new conditions or to modify them.

Escape outside Australia

The vast majority of Australian brokers have already sensed the upcoming changes. This resulted in obtaining additional licenses outside the ASIC's jurisdiction. Such a move was decided by, among others IC Markets, Axitrader, or XM Group. Thanks to this treatment, brokers will still be able to maintain the current trading conditions. Also, it has already been agreed before that customers change and choose the jurisdiction they want to trade in.

Initial announcements of regulatory changes considered a ban on the acceptance of non-Australian clients by Australian brokers. In the latest ASIC there is no information about it.

Reasons for regulatory changes

ASIC identifies the problem of excessive loss of retail clients as closely related to high leverage. In order to protect traders' funds, he decides to introduce the above changes at this stage, as well as introduce additional actions that will reduce the problem of excessive losses, i.e. use:

• enforcement actions to remedy misconduct
• public warnings and other statements
• supervision projects and thematic reviews
• stronger regulations
• extensive educational campaigns for retail clients and guidance for CFD issuers.

ASIC Commissioner Cathie Armor said:

"The severe losses suffered by retail clients trading highly leveraged CFDs and the continued volatility of the market during the COVID-19 pandemic highlight the need for stronger CFD protection in order of product intervention."

“The Leverage Ratio Limits in an order are designed to reduce the magnitude and speed of retail client losses by reducing CFD exposure and sensitivity to market volatility. This is in line with similar measures in major foreign markets, including the UK and the European Union. '

Official ASIC announcement (pdf)