ASIC sets some CFD product restrictions
We would like to bring to your attention changes that have been announced by the Australian Securities and Investments Commission (“ASIC”) relating to the products and services that FP Markets provides to you.
ASIC has announced that from 29 March 2021, CFD providers in Australia must adhere to certain CFD product restrictions when they are being offered to retail clients.
On 23 October 2020, ASIC made a product intervention order with respect to contracts for difference (CFDs), including margin FX products for retail clients.
These changes will come into effect from 29 March 2021.
See FP Markets Broker Service Review here.
What are the changes by ASIC?
The changes released by ASIC include:
1. Leverage ratio limits
The order will restrict the CFD leverage.
Leverage will be offered at a rate that is no greater than prescribed limits that have been set by ASIC.
The proposed limits are:
|Maximum Ratio||CFD Product|
|30:1||Major currency pairs|
|20:1||Minor currency pair, gold or a major stock market index|
|10:1||Commodity (other than gold) or a minor stock market index|
|5:1||Shares or other assets|
2. Margin close-out percentages
Standardize CFD issuers’ margin close-out arrangements.
A 50% close-out rule will be compulsory, which is in line with our current practice to liquidate open positions (to the extent required) if your account equity (cash after unrealised losses) is less than 50% of your margin required to maintain your open positions.
3. Negative balance protection
Negative balance protection limits retail client losses to the funds in their CFD trading account.
If a negative balance should occur on your account, the negative amount will need to be absorbed (credited back to you) by the broker.
FP Markets will be formally adopting negative balance protection on 29 March 2021.
4. Promotional offers
ASIC will prohibit providers from giving or offering any inducements.
Trading credits and bonus offers will no longer be allowed for retail clients under ASIC regulated entities.
Do the changes apply to all ASIC-Regulated clients?
No. The changes only apply to ASIC-Regulated RETAIL clients and DO NOT apply to clients who are categorised as Wholesale Investors or Sophisticated Clients (as detailed below).
If you fall into either of these categories, you can open an FP Markets Pro Account and leverage restrictions will not apply to you.
This announcement only applies to ASIC-regulated retail clients and will come into effect from 29 March 2021.
There is no change to the current situation until then.
What does an FP Markets Pro Account offer?
FP Markets Pro Account holders will not be affected by the proposed regulatory changes which include restrictions on leverage.
FP Markets Pro Account holders will be able to maintain maximum leverage levels across all instruments including Forex, Shares, Commodities, Metals, Indices and Cryptocurrency:
|Instrument Category||Retail Account||Professional Account|
FP Markets Pro account offers higher leverage rates for experienced traders.
The FP Markets Pro account is different from a retail trading account because it relies on a sophisticated investor classification set out in the Corporations Act.
If you would like to register your interest in being classified as a sophisticated investor please click below.
Check your eligibility by referring to the table below.
If you fit the criteria as outlined in one of the two tests below, take the next step and apply for an FP Markets Pro Account:
Option 1: Wealth test
- Criteria 1
- You have net assets of at least $2.5 million AUD. Must be verified by a certificate from a qualified accountant dated within the last 6 months.
- Criteria 2
- You have had a gross income for the last two financial years of at least $250,000 AUD per annum. Must be verified by a certificate from a qualified accountant dated within the last 6 months.
For the List and Conditions of Deposit and Withdrawal Methods for FP Markets, visit the page here.
Option 2: Experienced trader test
- Criteria 1
- Demonstrate your knowledge of leveraged trading by completing a short online test.
- Criteria 2
- Gross Income of $100,000 AUD or Net Assets of $500,000 AUD.
- Criteria 3
- Minimum trading experience satisfied by the following two criteria: At least 20 trades per quarter (for any 4 quarters in the last 5 years), and Minimum of $500,000 notional value in each of the 4 quarters of the last 5 years. (This can be demonstrated from your FP Markets account, another provider, or a combination of both.), or currently, work or have worked in the financial sector for at least one year in a professional position that requires knowledge of leveraged trading (FX or CFDs).
For the comparison of FP Markets Forex Trading Platforms (MT4, MT5, IRESS), visit the page here.