FBS, the Cyprus-based retail FX and CFD broker, has been granted an Australian Financial Services License (number 426359) and has been authorized by the Australian Securities & Investments Commission (ASIC) to offer its trading services to Australian residents.
The move will take place as the Australian financial watchdog will put in effect the new CFD trading rules, which require protection against negative account balances, standard margin close-out arrangements, and a softer commercial approach that excludes rebates, trading credits, and gifts.
Regarding leverage – which has been what attracted FX and CFD traders the most throughout the years – ASIC is following the steps of the European regulator, ESMA, and has decided to 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
FBS will enter the Australian retail FX and CFD trading market when many brokers there work to rearrange their business operations. If we take Europe as an example, brokers regulated by ESMA and its affiliates saw their average daily volumes dropping by one-third since the new leverage restrictions took effect.
With this in mind, retail brokers in Australia must prepare for a similar change in volumes and revenue as well as to make efforts to comply with the other rules besides leverage.
The significant drop in available leverage being offered to clients following the implementation of the restrictions brought up the topic of “going offshore” and quite a few AU registered online brokerages have already made the decision to onboard non-AU customers to island jurisdictions in order to maintain the same trading parameters for customers who want leveraged trading products.
FBS is a Cyprus-based retail FX and CFD broker. The company was already forced to comply with the new ESMA rules regarding leveraged trading. So, the new rules in Australia coming into effect on March 29, 2021, will probably be well received by brokers such as FBS and others with licenses in the UK and EU as it drives competitors away.