ASIC announces regulatory costs ahead of CFD trading restrictions
The Australian regulator “is acutely aware of the challenges facing many businesses due to COVID-19”, but made no reference to the challenges FX and CFD brokers will face amid the leverage restrictions.
ASIC has published the 2019-20 Cost Recovery Implementation Statement (CRIS), which provides regulated entities with details of ASIC’s forecast regulatory costs and activities by industry and subsector. The total cost of the regulatory operation is $320.331 million.
The regulator detailed that the Market Infrastructure and Intermediaries sector has a total operating expenditure of $53,266 million. Surveillance costs for the sector are the highest, at $13,083 million. By adding the allowance for capital expenditure and adjustments, ASIC comes to a total cost of $62. million to be recovered by levy.
Securities dealers cost $1.391 million, Over-the-counter (OTC) traders cost $9.661 million, and retail OTC derivatives issuers cost $10,384 million to regulate.
ASIC is currently supervising 1,030 securities dealers, 77 over-the-counter (OTC) traders, and 99 retail OTC derivatives issuers.
Securities dealers pay a minimum levy of $1,000 plus $2.71 per $1 million of annual transaction turnover. Over-the-counter (OTC traders pay a minimum levy of $1,000 plus $4,011 per FTE. OTC derivatives issuers pay a fixed amount of $108,084.
“ASIC is acutely aware of the challenges facing many businesses due to COVID-19 and is committed to working with regulated entities facing difficulties paying industry funding levies. ASIC will consider waivers due to the impact of COVID-19 on a case-by-case basis”, said the announcement.
The announcement comes ahead of the new CFD trading rules which will come into effect by the end of March. Leverage will be restricted to a point that average trading volumes are expected to drop by about one-third – taking from European brokers’ experience with ESMA’s new leverage rules.
From 29 March 2021, ASIC’s product intervention order will:
restrict CFD leverage offered to retail clients to a maximum ratio of:
30:1 for CFDs referencing an exchange rate for a major currency pair
20:1 for CFDs referencing an exchange rate for a minor currency pair, gold or a major stock market index
10:1 for CFDs referencing a commodity (other than gold) or a minor stock market index
2:1 for CFDs referencing crypto-assets
5:1 for CFDs referencing shares or other assets
Brokers will also have to standardize CFD issuers’ margin close-out arrangements that act as a circuit breaker to close-out one or more a retail client’s CFD positions before all or most of the client’s investment is lost. Protection against negative account balances and end all trading credits, rebates, or gifts to customers.