Re: Australia’s 1:30 leverage: ASIC Announces Leverage Cap, Negative Balance Protection

mlawson71 wrote:
Thu Mar 25, 2021 6:18 pm
Guys, the changes will go live in a few days time, if anyone is trading with Australian brokers, I hope you are prepared for it!
The new 'close out rule' to be introduced by ASIC was the one that caught many out when was introduced by ESMA in the EU and UK back in 2018.

It stipulates when the broker must close you out of a losing trade as your margin is used up (all for your own protection of course - silly you :wtf: ).

This from one Australian broker;

What is the new ASIC margin close out rule?

Put simply, under the new ASIC rules we will need to include running losses for limited risk positions when looking at the equity calculation. Let's look at a worked example.

Say you have $1200 cash on your account.
You place an Australia 200 trade with a guaranteed stop and it requires a margin of $1000.
If the market moves against you $200's worth you would then start to eat into your equity.
If the market continues to move against you by a further $500 (i.e. 50% of the margin required to open your trade) your position would be closed.
This is because your equity is now only 50% of your margin requirement.
The new ASIC rules require us to close the position.
You would be left with $500 in your account.
Please remember if the market gaps over this level then there is no guarantee to close your trade at this exact 50% level. There is a 'negative balance protection' rule which will be in place from March 27th, however this applies to the account as a whole and only applies to new positions opened after March 27th.
There are a couple of other important things to note

We will not be implementing 24 hour or weekend close out rules for ASIC retail clients. This change will be made on March 27th and will be applied on an account level (both existing and new positions).
If you have a regular trader account, you can still use running profits to cover margin on new positions.
Positions which have guaranteed stops will be margined at the higher value; maximum risk on the trade or the underlying market margin rate.

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