ASIC regulatory changes

Important information for account holders

On Friday 23rd October, the Australian Securities and Investments Commission (ASIC) issued a statement indicating they will restrict the marketing, distribution and sale of leveraged trading products to retail clients. The changes took effect on 29th March 2021.

The key changes are:

New Margin Rates
  • 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
  • 5:1 for CFDs referencing shares or other assets
  • 2:1 for CFDs referencing crypto-assets
New Protections
Negative balance protection will be applied, preventing you from losing more than the balance in your account.
A standardised margin close-out level of 50% of the total margin required for all open CFD positions will be applied to your account.
Certain promotional inducements such as rewards or gifts are prohibited (information services and educational tools are excluded from this).

City Index is supportive of protecting retail clients and have successfully implemented similar measures in other jurisdictions.

Professional Clients will not be impacted

By upgrading to Pro status, you will not be impacted by ASIC regulations.

If you have any questions about ASIC’s planned changes, we recommend you review our FAQs below or contact our client services team who will be on hand to help. If you wish, you can also view ASIC’s full statement.

FAQs


Q1) Who do the proposed rules affect?

Only retail clients are affected by the new measures. Retail clients also have the option to apply for professional client status, which would allow you to maintain your current margin rates.


Q2) What are the margin rates?

The measures introduced for retail clients are as follows:

Maximum leverage limits on new positions:

  • 30:1 for CFDs over major currency pairs (3.33% margin);
  • 20:1 for CFDs over minor currency pairs, gold or a major stock market index (5% margin);
  • 10:1 for CFDs over commodities (excluding gold) or a minor stock market index (10% margin);
  • 5:1 for CFDs over shares or other underlying assets (20% margin); and
  • 2:1 for CFDs over crypto assets (50% margin).


Q3) When were retail clients affected?

29th March 2021.


Q4) I am a City Index client - what happened to my existing positions?

If you are an existing retail client, any open position held over market close on Friday 26th March had the new margin rates applied over the weekend. Your account should have been sufficiently funded before market open on Monday 29th March to support any increase or positions were closed. Professional clients are not impacted by these changes, so existing positions will not be subject to margin changes.


Q5) What is ASIC?

The Australian Securities and Investments Commission (ASIC) is an independent Authority that contributes to safeguarding the stability of the Australian financial system by enhancing the protection of investors and promoting stable and orderly financial markets.

This is achieved by: Assessing risks to investors, markets and financial stability; completing a single rulebook for EU financial markets; promoting supervisory convergence; and directly supervising specific financial entities.


Q6) Why were new regulations introduced?

ASIC has adopted new measures on the provision of CFDs with the aim of increasing consumer protection across Australia by ensuring a common minimum level of protection for retail investors within the CFD market.

The measures were introduced industry-wide, meaning all CFD providers servicing clients in Australia need to comply.


Q7) What new protections do retail clients benefit from?

  • Standardised Margin Close Out Rule: If your margin level reaches the standardised margin close out (MCO) level, for example 50% (i.e. 50% of minimum required margin to cover your open positions), we are required to close any or all of your open positions as quickly as possible; this is to protect you from possibly incurring further losses.
  • Negative Balance Protection: Your account will have negative balance protection applied, meaning that your losses cannot exceed your deposits.


Q8) What other changes affect retail clients?

  • A prohibition on firms offering monetary and non-monetary benefits (excluding research and information tools).
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