Trading using ASIC rather than FCA from UK?

Beginner Questions
1

Hi

I have an EA strategy I want to use on MT5, and I’ve done all the backtesting - now I want to try demo testing.

So I signed up with 5 broker demo accounts ready to demo test in the new year after Christmas and compare any differences of spreads / slippage / missed orders etc.

My strategy is optimised around the margin requirements of the maximum retail leverage for retail traders in EU 1:30 and my intended initial start balance.

The thing is one of the brokers called me to say hi, and he said the choice is actually mine as to which regulator I have my account under because they have offices in UK, AUS and Cyprus. That it could be either FCA, ASIC, or CySEC. And that I could have up to 1:500 if I chose ASIC for example.

It sounded a bit strange to me that I’m in the UK and I could choose to be regulated by the Australian system?

So I googled it a bit and found some reports saying ASIC are onto the fact that clients are using their system outside Australia, mainly in China and EU - and that it is breaking the law. (The googledness)

Basically, I can choose a safe option spreadbetting broker under FCA in the UK and not have to pay tax, but be limited by the 1:30 leverage. Or, I actually have the original more kick-ass version of my strategy which the 1:500 leverage would allow to properly flourish if I could use the ASIC account… but is it dodgy? Even though it’s a CFD account and I’ll pay 20% capital gains tax above £12k profit in future (one dayyy), the gains would be so much greater from my backtesting that it would be worth it. But I don’t want to do something illegal now by accident and then later if / when / whatever I’m successful have it come back to bite me in the b…abypips.

I know obviously there is extra risk involved with a higher leverage and that’s another thing to consider, and with Brexit around the corner the 1:30 limit might not last forever but who knows… I just want to know firstly what’s the stance on this today, and is there anything wrong with it?

Thanks!

2

Don’t know whether its legal or not but you’ll certainly end up with less protection of your money and your rights.

UK SB firms must segregate clients’ funds into bank accounts separate from their own running capital. You would be eligible for reimbursement of your deposited funds up to £85k I think if the firm went bust. You cannot end up with negative balance - owing the firm money if you’re hit by a black swan event. The firm will close your positions if you start to exceed margin levels, so you should never be allowed to wipe out by normal market losses. If the worst comes to the worst, you are in the same country and speak the same language as the firm and the regulator and your lawyers and the courts: imagine trying to sue a firm in another country!

Will you get these things via another jurisdiction?

3

Thanks Tommor.

From what I can see, they do segregate client funds still into a separate bank trust account. They do offer negative balance protection up to 100,000AUD or equivalent in other currencies. The one thing I found in the T&Cs for this broker I’m not happy with about the Negative Balance protection is that it says you must contact them via email within 2 business days of going under 0 to request for the Negative Balance to be sorted out…

I’m thinking if it’s something to think about with other brokers if I found one that offers a better “no action” negative balance protection plus the segregation.

But also I guess you’re right about trying to get anything back from Australia if the broker went bust as it’s so far away etc.