The same document also proposes to significantly limit the trading of CFDs (CFDs).
The regulator said that the Australian market for binary options and CFDs is growing rapidly, with the number of clients more than doubling in the past two years to one million clients (99% are retail clients and the majority are based offshore).
Licensed issuers of these products conducted 675 million trades with clients last year and earlier this year held $2.9 billion of client money for trading.
ASIC is concerned that retail investors have suffered, and are likely in future to suffer, significant detriment from binary options and CFDs.
- licensed issuers received gross trading revenue of $490 million from binary options and $1.5 billion from CFDs—which can largely be attributed to a combination of net client losses and fees and costs charged to clients;
- CFD issuers automatically closed out 9.3 million client CFD positions in margin call, and
- over 41,000 clients’ CFD trading accounts went into negative balance, totalling -$33 million (that is, clients owed money to the CFD issuer).
A review conducted by ASIC in 2017 found that:
- 80% of clients who trade binary options lose money
- 72% of clients who trade CFDs lose money, and
- 63% of clients who trade CFD over currency pairs lose money.
Complex product features, such as the high leverage offered in CFDs—as high as 500-to-1 for foreign exchange CFDs—or the high likelihood of cumulative losses inherent in binary options, have contributed to retail clients’ financial losses and can often be misaligned with their needs, expectations and understanding.
В своем докумете ASIC proposes to:
- ban the issue and distribution of OTC binary options to retail clients,
- tighten trading conditions for over-the-counter CFDs for retail customers.
“A complete ban would prevent retail clients from losing money trading binary options. We believe binary options provide no meaningful investment or economic use, and have product characteristics similar to gambling products,” Commissioner Armour said.
Measures implemented by foreign regulators on OTC CFDs introduced temporary product intervention powers imposing, from 1 August 2018 to 31 July 2019, the following restrictions on the marketing, distribution or sale of CFDs to retail clients:
(a) leverage ratio limits on the opening of a CFD position by a retail client:
(i) 30:1 for major currency pairs;
(ii) 20:1 for non-major currency pairs, gold and major indices;
(iii) 10:1 for commodities other than gold and non-major equity indices;
(iv) 5:1 for individual equities and other reference values; and
(v) 2:1 for cryptocurrencies;
(b) a margin close-out rule on a per account basis;
(c) negative balance protection on a per account basis;
(d) a restriction on the incentives offered to trade CFDs; and
(e) a standardised risk warning.According to the regulator, under the supervision of the ASIC there are currently 65 licensed organizations or brokers that provide binary options and CFD trading opportunities. And only five licensed issuers of exclusively binary options.What will happen next. Currently, this document has consultative status and the regulator expects reviews and comments of brokers and all interested parties by October 1, 2019. After October 01, reviews will be analyzed and a final decision will be made. This decision will be published on the website of the regulator.The full text of the ASIC proposal can be found in the document at the link (in English) – cp322-published-22-august-2019.