CFDs/FX trading contracts with ASIC product intervention

Contracts for difference (CFDs) and foreign exchange (FX) trading contracted 15% in 2021 off the back of the corporate regulator’s product intervention, according to Investment Trends.

The research house’s latest leverage trading report found 100,000 Australians placed at least one CFD or FX trade in the past year, down from the peak of 117,000 in 2020. However, these figures were still up compared to 79,000 in 2019.

Investment Trends’ head of research, Irene Guiamatsia, said while this was the first time a market size reduction had occurred, it was consistent with muted growth observed elsewhere in the second half of the year.

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“A number of factors have caused the inflow of new traders and reactivators to taper, with the Australian Securities and Investments Commission [ASIC’s] product intervention dampening trade frequency and volume in 2021, and the absence of volatility that typically drives trader activity causing dormancy rates to increase,” she said.

The research house noted ASIC’s tightened restrictions on CFDs/margin FX was consistent with its European counterparts and curtailed leverage and trading inducements. It said 16% of traders, up from 7% in 2020 have applied for, and received, professional status.

However, cryptocurrency usage increased among CFD/FX traders over the past 12 months, with 33% using the asset class. Of these traders, 30% believed cryptocurrency would be the best-performing investment in the comping year with 40% of Zoomers believing this and 35% of Millennials.

“More traders are embracing crypto, with the quest for diversification and the central driver - many want some stake (even if small) in it,” Guiamatsia said.

“And for leverage traders, appetite is strongest for exposure to the physical asset class.”

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Seems ASIC believes their job is to protect consumers from making bad decisions and researching what consumers are doing, rather than policing the laws...... So I conclude that ASIC is a consumer interest group, a police force and via the enforceable undertakings it is also the judge and jury. That is truly an awesome combination!

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