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.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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