Australian ASIC lowers leverage to 1:20 and bans binary options

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Australian ASIC lowers leverage to 1:20 and bans binary optionsAustralia, which is one of the major centers for forex trading and which allows retail clients to use fairly high leverage, is about to lower its maximum limit to 1:20, and ban binary options altogether. In an effort to address the significant damage to retail clients caused by trading in binary options and CFDs, the Australian Securities and Investments Commission (ASIC) has proposed product intervention measures similar to those implemented by the European Securities and Markets Authority (ESMA) last year.

This became clear from an advisory paper published today, which proposes a single leverage ratio limit of 1:20 for all forex and gold pairs. This is actually more difficult than the European Securities and Markets Authority (ESMA) restrictions that allow the use of leverage up to 1:30 for major currency pairs. For stock indices, ASIC suggests a cap of 1:15, commodities excluding gold 1:10, stocks 1:5, and 1:2 cryptocurrencies.

Other product intervention measures in relation to offering CFDs to retail clients proposed by ASIC include providing negative balance protection, implementing a standardized approach for automatic closing of client CFD positions in margin call, banning certain trading bonuses, enhancing transparency of CFD pricing, and transparency of execution, costs and risks. .

Commenting on the planned restrictions, ASIC Commissioner Cathy Armor said: “ASIC has for many years taken strong measures to protect consumers of binary options and CFDs, using the range of regulatory tools available to us. However, we are concerned that consumers still suffer significant harm from trading these products. ”

To illustrate the harm to retail customers, ASIC has included some official information in its statement. According to a survey conducted by the Australian financial regulator in 2017, 80% of clients who traded binary options lost their money, 72% of clients who traded CFDs lost their investment amount, and 63% of clients who traded forex lost their money.

ASIC is now seeking feedback on proposed product intervention measures through October 1, 2019. Trading in binary options will most likely be banned, as figures show nearly all traders are losing money in them, and Cathy Armor said they have similar product characteristics to gambling products. .

We are on the verge of finding out if the proposed measures regarding CFD trading will be adopted, but it is certain that some restrictions will be applied to protect investors.

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