In August 2019, ASIC proposed changes to the way CFDs can be offered to Australian retail clients and kicked off a consultation period to open up the discussion. After gathering feedback from traders and the industry ASIC announced new regulations which went live on 29 March 2021. To comply with these new regulations you may notice some changes on your IG account from the week commencing Monday 22 March 2021. You can find a roadmap for these changes below.
Some of the changes include leverage ratio limits, standardised margin close out procedures, and negative balance protections for retail clients. The reason for such changes are to enhance protections for retail clients trading leveraged financial products in a rapidly growing market.
Below is a timeline listing the key dates of the ASIC release and our implementation of the changes made on retail CFD accounts. The changes outlined below will apply to retail CFD accounts held with IG’s Australian office. As New Zealand client accounts are held with the Australian office of IG, these will also apply to New Zealand accounts. Pro clients will not be impacted.
Wednesday 24 March 2021
Collateral - Clients were able to link their CFD and share trading accounts to use funds and shares held in their share trading account to cover margin for their CFD positions. As of Wednesday 24 March, linked collateral accounts are no longer an option for retail clients. Once we delinked collateral accounts as part of the regulatory changes, clients are no longer able to rely on their share trading account to cover CFD margin and need to ensure enough funds are held directly in their CFD account to cover the required margin deposit. If you have insufficient funds at this time your leveraged trading account will be at risk of position closures.
Thursday 25 March 2021
Select accounts set to closing only - Some clients may be trading with us under a select account, which allowed tailored rules around margin and liquidation. These account types have been switched to ‘closing only’ (i.e. the account type and agreed terms will remain, but you can only close your positions at your convenience and no new positions can be opened under this account type). Any new position would need to be opened under a newly set up, regular IG retail account, which will be accessible under the same login details.
Saturday 27 March 2021
Margin changes - Margin requirements to open and maintain leveraged positions were one of the more prominent aspects of the ASIC regulations. On Saturday 27 March, new margin floors were implemented across all ASIC retail accounts for all new positions. Pro Level 1 accounts also have new margin floors applied to their accounts. Existing positions will keep previous margin rates. You can find more information regarding retail margin requirements here and Pro margin requirements here. Retail clients will no longer be able to reduce their margin requirement by using stops.
Negative balance protection - All retail clients contracting to our ASIC regulated entity will have negative balance protection applied to their account. Pro Level 1 accounts that have not activated collateral will also benefit from negative balance protection. Please note this will only apply to debts incurred on positions opened after 27 March 2021.
Offsetting long and short positions - If a client is currently long and short a particular market then they will currently pay 10% of either leg. From 27 March, clients will have to pay 100% of the ASIC margin on each position. This change will only apply on new positions, therefore if you are were long and short the same market before 27 March, you will continue to receive the concession.
Rollovers - When Retail or Pro Level 1 clients futures contracts rollover and a position is opened after 27 March, then the new position will be margined based on the ASIC or Pro Level 1 minimums.
Automatic close-out - Although margin will not increase for existing positions opened before this date, all accounts will be subject to the standardised 50% closeout rule. If your account equity falls below 50% of the total margin deposit required then we will need to close positions on your account as soon as market conditions allow. IG has already had a 50% liquidation rule in place for standard accounts, however limited risk accounts and anyone using guaranteed stops will need to ensure they obtain enough funds on their account to cover margin in addition to all running loss on their positions. We will no longer be closing positions if your account is on margin call for 24 hours or leading in to the weekend. We will also ensure to waive any negative balance incurred on retail clients CFD trading accounts.
Monday 29 March 2021
Rebates - Some retail clients may have received rebates based on trade volumes. ASIC regulations mean that retail clients will no longer receive any form of rebate. Any rebate accrued before 29 March will still be credited.
Refer a friend – Bonuses for the refer a friend scheme can only be paid on qualifying trades placed before 29 March.
Share trading subscription fee - Clients that have held shares in their share trading account were able to have the quarterly subscription fee waived if they placed at least 3 trades in their linked CFD account. After this day, we will no longer be able to count CFD trades for the waiver of the quarterly subscription fee applied to share trading accounts. Any client that holds shares on a share trading account at the end of each quarter and has not traded at least 3 times across their share trading accounts only, will be charged the quarterly subscription fee.
If you have any queries or questions regarding the new ASIC regulations please add a comment below. You may also find the following links useful.
https://www.ig.com/au/asic
https://www.ig.com/au/professional
Once again, please remember that these changes only affect retail clients of the Australian office of IG(this includes New Zealand clients), and do not apply to Pro clients.
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