ASIC announces extension CFDs leverage restrictions for five years

The Australian Securities and Investments Commission (ASIC) revealed on Wednesday it has extended its product intervention order for retail issuance and distribution of CFDs for a further five years to 23 May 2027.

ASIC’s CFD trading restrictions first came into effect on 29 March 2021. Initially, the order was said to last for 18 months after which time it could be extended or made permanent.

The order imposes restrictions on CFDs issued to retail clients, including leverage ratio limits ranging from 30:1 to 2:1, standardisation of margin-close out rules, and negative balance protection.

Retail customer protection

The Aussie regulator highlighted that following the product intervention order, it observed a 91% reduction in net losses by retail client accounts. There were 51% fewer loss-making retail client accounts per quarter on average.

Additionally, ASIC noted there was an 87% decrease in margin close-outs and an 88% reduction in negative balance occurrences for retail clients.

ASIC ban

ASIC Commissioner Cathie Armour said:

Cathie Armour, ASIC

Cathie Armour
Source: LinkedIn

We have seen a substantial reduction in harm to retail clients resulting from CFDs as a result of ASIC’s product intervention.

Commissioner Armour added:

Our extension of the product intervention order for five years will ensure that the leverage ratio limits and other protections can continue to reduce the size and speed of retail clients’ CFD losses. These consumer protections are more important than ever during volatile market conditions.

A year ago, ASIC banned the issue and distribution of binary options to Australian retail clients as it found that binary options cause significant financial damage to retail clients.

In its four-year corporate plan for 2021 to 2025, published in August 2021, the Aussie watchdog outlined monitoring compliance for CFDs and binary options as a priority.


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