ASIC update: What are the new protections I have as a retail client?

We look at the impact ASIC's latest protections will have on retail clients.

As you may know by now, Australia’s corporate regulator – the Australian Securities and Investments Commission (ASIC) – recently made a number of product intervention orders around CFDs – aimed at improving protections for retail clients.

The heart of these changes focus on margin close out protections, negative account balances and leverage restrictions. Ultimately, ASIC is trying to improve the overall experience for retail investors when participating in financial markets.

These changes are set to come into effect on March 29, 2021.

Key protections at a glance

One key protection set to impact retail traders involves the standardisation of the way in which financial companies – such as IG – handle margin close out arrangements.

In practical terms, this means that if the total funds in your CFD account (including any unrealised profits or losses) fall below 50% of the margin required for all your open CFD positions on your account, one or more of your open CFD positions will be closed out as soon as market conditions allow.

Building on that first change, ASIC’s latest intervention order is also aimed at protecting retail clients against the possibility of incurring a negative balance. Under these changes: total losses on CFD positions will not be able to exceed the funds in your trading account.

In addition to these protections, ASIC has also introduced leverage restrictions, which limits the amount of leverage a retail client can trade with – when trading forex, shares and cryptocurrencies and other asset classes.

Under the new rules, the following leverage restrictions apply to retail traders:

Asset class

Current minimum margin rate

Minimum margin rate from 29 March 2021

Major forex pairs1

0.5% (200:1)

3.33% (30:1)

Major indices2

0.5% (200:1)

5% (20:1)

Minor forex pairs1 and gold

0.5% (200:1)

5% (20:1)

Minor indices2

0.5% (200:1)

10% (10:1)

Commodities (excluding gold)

1.5% (67:1)

10% (10:1)

Shares or other underlying assets

5% (20:1)

20% (5:1)

Cryptocurrency

10% (10:1)

50% (2:1)

Next steps?

If you want to learn more about how ASIC’s latest changes may impact your trading experience – or think you may qualify as a pro trader (meaning you would be classified as a wholesale client, and may not be afforded the same protections as a retail client) – click here now.

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