Australia extends product intervention in the Forex market by 5 years

Australian Securities and Investments Commission (ASIC) today published a decision that extends the existing OTC product intervention (ie, Forex and CFD) for another 5 years. What exactly is it about? In 2019, following the changes introduced by ESMA - supervision regulating the OTC market in Europe - the Australian commission decided to "normalize" the local market Forex brokers, incl. limiting leverage and banning binary options for retail clients.

The changes announced in October 2020 were to apply from May 2021 for 1,5 years, i.e. expire in the coming weeks. In October last year, it was suggested that the date of their "expiration" would be set for 2031. However, it was decided that this period would be extended by 5 years, i.e. until May 23, 2027 - at least for the present moment. The case is otherwise binary options, which are banned until October 1, 2031, which means that these instruments can be treated as a relic of the past.

The new-old reality of retail traders

The decision published by ASIC should not shock anyone. After all, for years we have not heard any voices suggesting that the regulations currently in force would be relaxed - both in Australia and in Europe. Limited leverage and the lack of access to binary options is a reality that most traders have already got used to, and others have opted for brokers from off-shore countries such as Seychelles, Belize or Marshall Islands to be able to continue trading on conditions without being imposed top-down limitations.

New requirements for issuers

The Australian regulator has additionally specified new financial requirements for issuers of over-the-counter (OTC) derivatives for retail clients. The financial requirements are designed to provide Australian Financial Service Licensees with adequate financial resources to operate in accordance with the The Companies Act 2001 and to manage the operational risk inherent in the OTC derivatives market.

Retail issuers of OTC derivatives must:

• meet the net tangible assets (NTA) requirement in which the licensee must have a higher amount of $ 1 or 000% of median income
• prepare quarterly cash flow forecasts for a period of 12 months based on rational estimates of revenues and costs in this period
• meet the NTA liquidity requirement, where the licensee must have 50% of the required NTA in cash or cash equivalents and 50% in liquid assets,
• Comply with financial trigger point reporting obligations if licensees do not have the required NTA.

Official ASIC message