ASIC Proposes to Extend Retail CFDs Restrictions till 2031

The Australian financial market regulator, ASIC has published a consultation paper on Monday seeking a further extension of the already imposed restrictions on the sale and distribution of retail contracts for differences (CFDs) until April 1, 2031.

The regulator imposed ongoing restrictions on retail CFDs by the end of March this year. However, the product intervention order will expire on March 23, 2022, unless it is extended.

“We propose to extend the CFD Order so that it will remain in force until it is revoked or sunsets on 1 April 2031,” the latest regulatory proposal stated.

ASICs restrictions include the reduction of CFDs leverage to a maximum of 30:1 for retail traders, standardizing margin close-out arrangements, mandatory negative balance protection and banning from providing incentives to new traders.

The Aussie restrictions were on par with the retail CFDs trading imposed by the European regulator earlier.

Good for the Traders

The proposal for extension of the order came after the regulator observed a quarter of much-improved trading conditions based on several statistics.

It highlighted that the losses of retail CFDs traders reduced to AUD 22 million in the three months of the imposition of the restrictions, compared to the average quarterly loss of AUD 372 million in the previous year. That was a reduction of 94 percent. Additionally, there were 45 percent fewer loss-making accounts and the average losses made by retail accounts also decreased.

In addition, the regulator revealed that the split between the profit and loss-making traders improved to an even 50 percent, improving from the 36 percent profit-making accounts and 64 percent loss-making accounts in the previous year. Furthermore, margin close-outs decreased by 85 percent, while negative balance instances reduced tenfold for retail clients.

The regulator will accept industry consultation on the proposed extension period till November 29. “ASIC will continue to monitor and assess the performance of the CFD product intervention order during the consultation period,” the Aussie regulator added.