ob体育 has extended its product intervention order imposing conditions on the issue and distribution of contracts for difference (CFDs) for a further five years to 23 May 2027.
Since 29 March 2021, the product intervention order has strengthened protections by reducing CFD leverage available to retail clients and by targeting product features and sales practices that amplify retail clients鈥� CFD losses. ob体育鈥檚 extension of the product intervention order ensures that CFD protections in Australia remain in line with those in force in comparable markets elsewhere.
ob体育 also released today Report 724 Response to submissions on CP 348 Extension of the CFD product intervention order. The report summarises ob体育鈥檚 analysis of the impact of the order, using data from over 60 CFD issuers. It highlights the key issues raised in submissions to Consultation Paper 348 Extension of the CFD product intervention order (CP 348) and details ob体育鈥檚 responses to those issues.
ob体育 found that the product intervention order has been effective in reducing the risk of significant detriment to retail clients resulting from CFDs. For instance, ob体育 observed during the order鈥檚 first six months of operation:
- a 91% reduction in aggregate net losses by retail client accounts (from $372 million to $33 million aggregate net loss per quarter on average)
- 51% fewer loss-making retail client accounts per quarter on average
- an 87% decrease in margin close-outs affecting retail client accounts per quarter on average
- an 88% reduction in negative balance occurrences for retail clients per quarter on average.
ob体育 Commissioner Cathie Armour said, 鈥榃e have seen a substantial reduction in harm to retail clients resulting from CFDs as a result of ob体育鈥檚 product intervention.鈥�
鈥極ur extension of the product intervention order for five years will ensure that the leverage ratio limits and other protections can continue to reduce the size and speed of retail clients鈥� CFD losses. These consumer protections are more important than ever during volatile market conditions,鈥� Commissioner Armour said.
Background
A CFD is a leveraged derivative contract that allows a client to speculate in the change in value of an underlying asset, such as foreign exchange rates, stock market indices, single equities, commodities or crypto-assets.
The product intervention order came into effect on 29 March 2021 after ob体育 reviews in 2017, 2019 and 2020 found that most retail clients lose money trading CFDs. The order imposes restrictions on CFDs issued to retail clients, including:
- leverage ratio limits ranging from 30:1 to 2:1
- standardisation of margin-close out rules
- negative balance protection
- prohibitions on offering or giving of certain inducements (refer 20-254MR).
In addition to the product intervention order, ob体育鈥檚 actions to address concerns about CFDs include:
- enforcement action to address misconduct (for example, refer聽21-119MR, 21-051MR 补苍诲听20-246MR)
- public warning notices and other statements
- surveillance projects and thematic reviews
- stronger regulations
- retail client education campaigns 补苍诲听guidance for CFD issuers.
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