It was just last year when the Australian Securities and Investments Commission (ASIC) had published its consultation papers when it comes to product intervention measures. These proposed product intervention measures were for contracts for differences (CFDs) and binary options, in particular. Quite recently, the regulator had published some of the feedback that it had received from various participants within the industry. This includes major brokerages across the country, as well.

Following ESMA’s Footsteps

It was back in August of last year when ASIC published “CP 322 Product Intervention: OTC Binary Options and CFDs.” This was done after Australia’s parliament had given product intervention powers to ASIC. These powers are similar to the powers that its European counterparts, the European Securities and Market Authority (ESMA) had exercised back in 2018.

In particular, ASIC had proposed to enact the complete ban of binary options within Australia. Alongside this, it planned to implement leverage restrictions regarding CFD products, as well. ASIC did, however, stipulate that it will not distinguish between minor and major currency pairs, as ESMA had done.

An Array Of Comments

Instead of following ESMA’s path, the Aussie watchdog had proposed a singular limit on the leverage ratio for all possible currency pairs: 20:1. As for commodities excluding gold, they urged for a 10:1 ratio, for equity indices 15:1, equities 5:1, as well as 2:1 for cryptocurrencies.

ASIC had received 410 submissions since the publishing of its consultation paper. Amusingly enough, only 41 of these were from entities, with the remaining 369 coming from individuals. From what can be gleaned from non-confidential submissions made by entities, the brokers in Australia have taken exception against ASIC for trying to implement leverage that restrictive.

Pepperstone Holds Concerns

In particular, a foreign exchange broker headquartered in Australia, Pepperstone, has been rather vocal regarding the intended use of ASIC’s product intervention powers. According to Pepperstone’s statement, while it supports improving the standards, this proposal has cause for concern.

Tamas Szabo stands as the Group CEO of Pepperstone and gave comments about the matter at large. He described the requirements for CP322 as far too stringent, and doesn’t allow for investors that are both aware of, and accept the associated risks in trading in these products to trade as they need to.

As such, Szabo stated that Pepperstone has concerts regarding the freedom of choice of investors being restricted due to this. As a result, Szabo speculates that they will seek alternatives outside of Australia, even if that meant trading outside of a regulated jurisdiction, which is very bad in a multitude of ways.