Will ASIC restrict Binary Options and CFDs?

June 27, 2019 | AtoZ Markets The Australian Securities and Investments Authority (ASIC) has announced that it is formally preparing to deploy its product intervention measures as part of the government strategy of consumers’ protection. 

The community wonders, will ASIC restrict binary options and CFD’s following the pan-European regulators initiative?

Australian parliament expands ASIC powers

Recalling retail consumers protection strategy in Australia, in April  2019 the Australian Parliament first time announced expanding ASIC product intervention powers. The approved product intervention law, as the Australian lawmakers emphasized, would enable the ASIC to intervene in cases where the distribution of certain retail products is risky to consumers.

Back then, the authority noted, the updated regulatory authority is likely to be implemented from the beginning of 2021.

However, the regulator has highlighted that the new measures are available for ASIC to use now. The authority has already started consultations with the industry as it prepares to begin using its new powers as early as August. Under the new rules, the Australian financial regulator has to consult before implementing every decision.

In a statement, the Deputy Chair of ASIC, Karen Chaster said that the watchdog is aiming to “respond to significant consumer detriment” swiftly.

According to the latest announcement, ASIC seeks public input on the product intervention power consultation documents by the 7th of August 2019. The final regulatory guide is to be released in September 2019. In addition, separate ASIC consultation on its proposed guidance on the design and distribution obligations will commence later this year.

Will ASIC apply ESMA rules’ to binary options? 

There is a strong belief among experts, that following its pan-European regulatory colleague, ASIC might restrict most popular products for retail investors- CFD’s and ban binary. After the financial crisis of 2008, Australia seeks to adhere to the G-20 financial regulatory regime and make local financial legislation similar to those that already exist in the EU, Japan, and the United States. One of the reasons is the increasing flow of retail forex traders to Australia from Europe.

But how the adoption of the new rules might impact the financial market in Australia? Over the past couple of weeks, certain local brokers informed their overseas clients about changes in their accounts. While some firms have offered their customers options through offshore subsidiaries, others continued to expect more information from ASIC about the extent of the changes coming to the market. While FCA imposed a strict leverage limit for retail customers at 1:30, CySEC introduced three levels of categories for different customers. While customers can use up to 1:50, others up to 1:20.

European regulators attitude toward binary options and CFD’s

In August 2018 the European Securities and Markets Authority (ESMA) placed temporary restrictions on the binary options industry and proposed new leverage restrictions on CFD’s. At the moment, the pan- European regulator expects that all European national regulatory authorities are soon to apply the binary options ban and restrict CFD’s.

ESMA has already approved proposals on product intervention measures taken by national regulators from Austria, Estonia, Slovak, and the Czech Republic. The same initiative has already been taken in the UK, Holland, Denmark, and Germany. The Polish financial watchdog is the last person by the moment, which jumped on the bandwagon of European regulators making plans to place a permanent ban on binary options in Poland come 2 July 2019. 

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