The Australian Securities and Investments Commission (ASIC) has proposed a ban on the sale of binary options to retail clients and to restrict the sale of contracts for difference (CFDs).
In a consultation paper issued today, the regulator said it was concerned that retail investors had suffered, and were likely in the future to suffer, significant detriment from binary options and CFDs.
ASIC said it has issued a consultation paper in which it is proposing to:
- ban the issue and distribution of OTC binary options to retail clients; and
- impose conditions on the issue and distribution of OTC CFDs to retail clients.
Commenting on the move, ASIC commissioner, Cathie Armour said, “For many years ASIC has taken strong action to protect consumers of binary options and CFDs, using the range of regulatory tools available to us. However, we are concerned that consumers continue to suffer significant harm from trading these products".
“A complete ban would prevent retail clients from losing money trading binary options,” she said. “We believe binary options provide no meaningful investment or economic use, and have product characteristics similar to gambling products.”
ASIC's proposed restrictions on the offer of CFDs to retail clients include:
- imposing leverage limits, which are set out in Section F of CP 322;
- implementing a standardised approach to automatic close-outs of client’s CFD positions in margin call;
- protecting retail clients against the risk of negative CFD trading account balances;
- prohibiting certain trading inducements; and
- enhancing transparency of CFD pricing, execution, costs and risks.
The regulator said its proposals are broadly consistent with measures implemented in many overseas markets.
Comments
This is a positive move by ASIC. However they will be fighting a losing battle to shut down every dodgy financial product that consumers are being increasingly drawn into. The over regulation of financial advisers is making it much harder for consumers to access affordable good quality advice. It is creating a vacuum for scams and dodgy products to proliferate. Just look at the growth of junk insurance prompted by O'Dwyer's excessive restrictions on insurance advice.
This is bullshit. Leave things as they are.
Um.....what about sports gambling and all the other stuff my kids have to see while they watch footy ? This is just another attempt to keep people financially illiterate.
Sports gambling is um.... gambling. It is clearly advertised as such.
CFDs and binary options are also gambling, but are promoted as investments. Financial literacy can be achieved far more cheaply and effectively by reading a book than losing money on a pseudo investment.
Take a look at the housing sector for government/bank sanctioned gambling. Touted as the biggest "investment" you'll make in life. We understand the risk here because we all do it and information is readily available. My point is instead of banning and over regulation. Provide education to everyone at places like school. The onus is on the authorities in a free market economy to teach the risk reward for the purchase of anything.
I recently started trialing cfds after doing stock trading for many years. I realised its quite clise to gambling and more risky than sock trading . Surely most people who get in should know the risks. Most platforms offer trial and demo modes which should be made compulsory requirement. My only whinge is demo mode should reflect real trading fees n chrges.
Ban is not necessary for cfds Just more education.
"Um.....what about sports gambling and all the other stuff my kids have to see while they watch footy ? This is just another attempt to keep people financially illiterate." 100% agree.....
Pokies in every Pub, a Casino in every major Australian City..... No problem... hey Commissioner...
This is a total overreaction to a few that lost money in these markets.... over policing at it's finest.... I'm betting that this development was orchestrated from overseas once Europe and the US Market Makers watched their funds vanish to the Australian based Brokers....
1. All this does is ensures that the MM's have more cash at their disposal thanks to the tighter leverage..... $200 retail accounts will explode into $2k deposits just to trade pitances....
2. It shows ASIC is incapable of regulating anything other than their frequent flyer points..... By bowing to pressure from overseas interests and targeting the low hanging fruit of the financial world... God only know the Banks F$%ked them over when push come to shove......
There is absolutely nothing left in Australia that is untouched by Bureaucratic over reach....
I use CFD's to short companies. I know the risk. I make money.
Make people pass a test to be able to continue to use them, don't ban them because some people are morons.
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