What you need to know
ASIC recently put out a proposal that's relevant to the products you trade. We’ve put together a summary of the proposed reform below to help you understand the changes and how they affect you.
1. Proposed changes to leverage caps: a key focus of the proposal is leverage restrictions, which will affect the amount of margin retail clients are required to deposit to trade CFDs or FX. Here’s how the proposed changes look:
• 20:1 leverage on currency pairs and gold = 5% margin
• 15:1 leverage on major indices = 6.67% margin
• 10:1 leverage on commodities (excluding gold) = 10% margin
• 2:1 leverage on cryptocurrency-assets = 50% margin
• 5:1 leverage on shares or other underlying assets = 20% margin
2. Compulsory margin close-outs: If the funds you hold in your account fall to less than 50% of the total initial margin required for all of your open trades, there's a requirement to close out your positions.
3. Other changes you should know: there are a number of other proposals that could affect you, including disclosures, prohibitions on inducements (e.g. trading rebates and gifts) and displaying of risk warnings, as well as negative balance protection for clients. You can read the full release here or visit our website for more details.
When will this happen?
This is just the start of the regulatory reform journey, so the most important thing for you to know is that nothing has changed at this stage. ASIC’s consultation process ends on 1 October 2019, after which point ASIC will consider all feedback and make a decision. Any changes to leverage can come into effect 20 days after that decision is made, while other changes will be implemented in the three months following the decision.