The Australian financial regulator, the Australian Securities and Investments Commission (ASIC), announced a set of new regulatory rules that apppear to have been heavily modelled after the regulation introduced by ESMA in the European Union last year.
Those rules involve reducing CFD leverage, protection against negative balances, standardised CFDs brokers margin close-out, banning bonuses and other incentives as well as the likely banning of binary options.
The reason for this step is a research among the clients of 13 different brokers. Those clients traded in CFDs and lost over $774 million only between March and April 2020.
According to the ASIC Commissioner Cathie Armour, the reason bind those mind-boggling losses is the high leverage and the continuing market volatility caused by the pandemic. In the light of these circumstances ASIC capped leverage at different levels for different assets:
- 1:30 leverage for CFDs on major currency pairs made of Australian, Canadian or US dollar, British pound, euro, Japanese yen and Swiss franc
- 1:20 leverage for CFDs on minor currency pairs made of any currency pairs excluding the major currency pairs, gold or a major stock market index, for example, CAC 40, DAX, Dow Jones Industrial, etc.
- 1:10 for CFDs on commodity or minor stock market index
- 1:5 for CFDs on shares and other assets;
- 1:2 for CFDs on crypto-assets