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Australian Brokers may be forced to reduce leverage on FX & CFDs

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T0BY

T0BY

counterparty
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ASIC is proposing 20:1 leverage restrictions on spot FX, to come in line with ESMA, Japan, South Korea, Hong Kong, ect..
Little annoying, as not having to keep so much capital tied up with the broker is something I liked.. but I guess it was just a matter of time.
 
T0BY said:
ASIC is proposing 20:1 leverage restrictions on spot FX, to come in line with ESMA, Japan, South Korea, Hong Kong, ect..
Little annoying, as not having to keep so much capital tied up with the broker is something I liked.. but I guess it was just a matter of time.
Click to expand...

Yes not just fx. banning binary options(who trades them?) 20:1 on Gold. 5 :1 stocks 15:1 Indices and a few other things like ,no free incentives .
Probably the responsible thing to do as leverage could cause a big crisis if let go too high.
But ! it does as you say , introduce more broker risk for the trader.
Rough math tells me that with a 100:1 leverage fx acc. with 6 x 2% risk trades I would need for a 100 pip average stop on the daily charts.about 10% initial margin(based on AUD /USD 100 pips $1340 initial margin per 2% risk)then 12% for trade losses then maybe a few % extra for unknown event slippage etc.
So Around 25% of trading account in the brokers hands.
Now with 20:1x 6 x2% Risk trades
40% initial margin( 1x 2% risk trade is now $6700 initial Margin) then 12% for trade losses a few % xtra ,
About 55% of your account in brokers hands.
 
IG are offering clients the chance to upgrade from retail to wholesale client status, inorder to avoid restrictions. To qualify you need 2.5 mil net assets, or have made quarter mil p.a last 2 consecutive years.
Australian brokers with overseas entities (eg. IC Seychelles) are no longer letting Australian citizens move their accounts offshore.
 
When ESMA imposed leverage restrictions for retail traders, Australian brokers enjoyed an influx of European clients opening accounts with Australian firms.
Now they will be leaving in thier droves in seek of less regulated pastures. No doubt they'll lose some locals as well.
Australian brokers will suffer, retail clients will suffer. The purpose of these changers isn't going to save traders from themselves. It's just international regulatory P.R.
The only real winners will be less regulated offshore brokers as far as I can see.
 
i cant read the article toby as its behind a paywall, but in any case, bloody asic, sitting on their hands re things that urgently need to be addressed, especially in the banking sector, while sticking their beak into things which help people to manage their risk and make some money ...
 
Does anyone know when this legislation is goin to come into effect? IG told me early january but I have not heard anything. But i am still reluctant to open any new positions until i have clarity.
 
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