The latest major forex hub which allowed retail clients to use higher leverage, Australia, is about to cap leverage at 1:20, and ban binary options altogether. In an attempt to address “significant detriment to retail clients” resulting from trading in binary options and CFDs, the Australian Securities and Investments Commission (ASIC) proposed product intervention measures similar to those applied by the European Securities and Markets Authority (ESMA) last year.
This became clear from a consultation paper published today, which proposes a single leverage ratio limit of 1:20 for all forex pairs and gold. This is actually harsher than ESMA’s restrictions which allow the use of leverage of up to 1:30 for major currency pairs. As regards equity indices, ASIC suggests a maximum level of 1:15, commodities excluding gold 1:10, equities 1:5, and crypto-assets 1:2.
The other product intervention measures regarding offering CFDs to retail clients proposed by ASIC include providing negative balance protection, implementing a standardized approach to automatic close-outs of client’s CFD positions in margin call, prohibiting certain trading inducements, and enhancing transparency of CFD pricing, execution, costs and risks.