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Attachments: Breaking: Australian Parliament Passes Product Intervention
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Breaking: Australian Parliament Passes Product Intervention

  • Post #1
  • Quote
  • First Post: Apr 6, 2019 2:21am Apr 6, 2019 2:21am
The ASIC is getting the same powers ESMA has in Europe but might take two years before using them

https://www.financemagnates.com/fore...ervention-law/

decrease leverage is coming
forex for retailers is dying
hopefully ASIC won't be as foolish as ESMA and leave leverage as it is or increase it at best

FX is currently such a bonanza for Australia that they would shoot themselves in the foot , were they to act as unwisely as ESMA

the 2008 financial crisis has nothing to do with FX leverage , it was mainly due to subprime lending , credit mismanagement and poor risk management by Investment Banks

only incompetent people such as ESMA manage to kill retail FX with ridiculous max 30 : 1 leverage

hopefully ASIC will be the wise guy in the room , think with their own head and won't follow ESMA footsteps
Offshore brokerage firms are the future anyway.
The sooner the better.
Quote
The reason for the changes is once more a long list of clients that complained to the local regulator.
IMO this won't stop complaints, it may reduce the number which I guess satisfies all parties, keeping the brokers in business, ASIC still serves a purpose and the retail client reduces the number of open positions, so gets to lose money slower keeping them trying for longer.
No different to reducing road speed limits.
My comments are not to be taken as trading advice, not a financial advisor
I fall under esma and initially was apprehensive and concerned about it. Now that it has happened, I realise it isn't as bad as initially thought. I can bring in between 10 and 20 percent a month under 30:1 so it isn't a train smash.
I think comments like "reduced leverage is coming" is a bit premature. It is a possibility. But let's wait until

a) the law is actually enacted (in two years or so)

b) ASIC puts out a consultation on its proposed changes (like they always do and other developed countries do)

c) the time from the consultation closure period to the enactment period. 6-12 months.


I personally don't see them doing a hard limit. And if they do, it would be higher like 1:100 (or hopefully 1:200 if we are lucky). What they might do is have a soft limit for new traders and a waiting period before higher leverage can be granted.

Switzerland doesn't suffer from all this garbage. But then again, all of the forex brokers have the equivalent of a banking license. So you don't see a lot of the negative tactics that some retail people are having (delaying orders, not processing withdrawal, etc). It's also a bit of a pain to open an account.
Quoting forevermaat
I think comments like "reduced leverage is coming" is a bit premature. It is a possibility. But let's wait until a) the law is actually enacted (in two years or so) b) ASIC puts out a consultation on its proposed changes (like they always do and other developed countries do) c) the time from the consultation closure period to the enactment period. 6-12 months. I personally don't see them doing a hard limit. And if they do, it would be higher like 1:100 (or hopefully 1:200 if we are lucky). What they might do is have a soft limit for new traders...
well actually, any Swiss broker that offers Binary Options is basically scamming the retail customer and using negative tactics.
Don't Worry Be Happy
Quoting MrPresident
{quote} well actually, any Swiss broker that offers Binary Options is basically scamming the retail customer and using negative tactics.
I'm not particularly fond of BO's myself unless they are cleared through a regulated exchange like NADEX. Not sure how FINMA regulates BOs, but you don't hear too much about platform manipulations and refusals of withdraws with Dukas or other Swiss broker. Can't say the same about the Israeli, Cyprus or other Binary Option firm equivalents.

If for some odd reason I were to trade BOs, Dukas would likely be one of the better ones to attempt such a bet. I would still screen record the platform terminal with journal showing just to be safe.
Quoting forevermaat
{quote} I'm not particularly fond of BO's myself unless they are cleared through a regulated exchange like NADEX. Not sure how FINMA regulates BOs, but you don't hear too much about platform manipulations and refusals of withdraws with Dukas or other Swiss broker. Can't say the same about the Israeli, Cyprus or other Binary Option firm equivalents. If for some odd reason I were to trade BOs, Dukas would likely be one of the better ones to attempt such a bet. I would still screen record the platform terminal with journal showing just to be safe.
Forex Binary Options trading is a scam that guarantees a 99% chance of losing. It is not regulated by any authority.
Don't Worry Be Happy
Quoting forevermaat
I think comments like "reduced leverage is coming" is a bit premature. It is a possibility. But let's wait until a) the law is actually enacted (in two years or so) b) ASIC puts out a consultation on its proposed changes (like they always do and other developed countries do) c) the time from the consultation closure period to the enactment period. 6-12 months. I personally don't see them doing a hard limit. And if they do, it would be higher like 1:100 (or hopefully 1:200 if we are lucky). What they might do is have a soft limit for new traders...
The letter which Australian brokers received today is signaling them to stop providing financial services to new clients residing in overseas jurisdictions where the broker is not licensed. In other words, firms which do not have an EU license, for example, can not onboard new clients from the EU.
The wording of the letter sent out to Australian brokers by the ASIC’s OTC products compliance team is also mandating firms to take steps to close the open positions of existing clients from overseas jurisdictions where the broker is not licensed by the end of May.
Quoting Bicarus
{quote} The letter which Australian brokers received today is signaling them to stop providing financial services to new clients residing in overseas jurisdictions where the broker is not licensed. In other words, firms which do not have an EU license, for example, can not onboard new clients from the EU. The wording of the letter sent out to Australian brokers by the ASIC’s OTC products compliance team is also mandating firms to take steps to close the open positions of existing clients from overseas jurisdictions where the broker is not licensed...
I am aware of the recent letter. My understanding is that it was initiated by Chinese authorities trying to stop currency flow into Australia. And also some brokers spoofing or misleading Chinese clients about ASIC authorization. It's more of a political move than anything else. Also, targeting EU residents looking for increased trading possibilities.

The target was/is EU residents and Chinese residents.

I think it is a bit of an over-reaction and we should wait another few business days to see how brokers respond. It would kill the forex trading community there if they literally only allowed Au residents to trade at Au brokers. Why doesn't futures and stocks not have these ridiculous demands? What makes OTC products so special?

My understanding is that some Au brokers did see this coming already and already have overseas entities if the worst case scenario should come.
Quoting forevermaat
{quote} it was initiated by Chinese authorities trying to stop currency flow into Australia
that's why ASIC won't be as foolish as ESMA and leave leverage as it is
Quoting forevermaat
{quote} I am aware of the recent letter. My understanding is that it was initiated by Chinese authorities trying to stop currency flow into Australia. And also some brokers spoofing or misleading Chinese clients about ASIC authorization. It's more of a political move than anything else. Also, targeting EU residents looking for increased trading possibilities. The target was/is EU residents and Chinese residents. I think it is a bit of an over-reaction and we should wait another few business days to see how brokers respond. It would kill the forex...
from what i have gathered. brokers are moving overseas ex esma/prc clients under the "wholesale client" umbrella. not the same level as protection as a retail but that is the cost if one wants to use a au broker. being a wholesale client one would also be able to maintain leverage. should asic's next move be to cut it.
  • Post #15
  • Quote
  • Edited 8:28am Apr 14, 2019 7:19am | Edited 8:28am
Quoting Bicarus
{quote} from what i have gathered. brokers are moving overseas ex esma/prc clients under the "wholesale client" umbrella. not the same level as protection as a retail but that is the cost if one wants to use a au broker. being a wholesale client one would also be able to maintain leverage. should asic's next move be to cut it.
As far as I understand the "wholesale client" status equals the professional status under ESMA jurisdiction. Most of the retails will not fullfil the necessary criterias.

PS: FinanceMagnates summarized the potential scenario quite good imho:

"As in the EU case from last year, the most detrimental result is for end-clients which are still looking to trade with high leverage. Those will now look once again to brokers located offshore, in remote jurisdictions that provide questionable protection.
While Australian brokers have remained mostly outside of this industry trend, the times are changing fast. Companies which don’t have offshore subsidiaries will start looking to open new ones to be able to mitigate the impact of the new restrictions which the ASIC demands.
In the meantime, EU brokers could breathe a sigh of relief – they will no longer be undercut by Australian firms offering better trading conditions to their clients. As is the case in any market – one party’s pain is another one’s gain. Regardless, the industry will once again need to adapt to yet another sharp turn. If history is any guide, this too shall pass."
Quoting Drolph
{quote} As far as I understand the "wholesale client" status equals the professional status under ESMA jurisdiction. Most of the retails will not fullfil the necessary criterias. PS: FinanceMagnates summarized the potential scenario quite good imho: "As in the EU case from last year, the most detrimental result is for end-clients which are still looking to trade with high leverage. Those will now look once again to brokers located offshore, in remote jurisdictions that provide questionable protection. While Australian brokers have remained mostly...
Wrong. As per corporation act. Wholesale client is 500k treshhold

Calculating the AUD $500,000 threshold, we take account of the value of a derivative, as calculated by the face value or notional value of that derivative. For example, a client with an Initial Margin of $5,000 who selects 100:1 leverage for a derivative transaction will have a notional transaction value of $500,000 and will be regarded as a wholesale client. Similarly, a number of different derivatives (short or long) can be aggregated together to meet the $500,000 threshold if they are entered into at or about the same time.

That said, as stated. Wholesale dont have same protection as retail
Quoting Bicarus
{quote} Wrong. As per corporation act. Wholesale client is 500k treshhold Calculating the AUD $500,000 threshold, we take account of the value of a derivative, as calculated by the face value or notional value of that derivative. For example, a client with an Initial Margin of $5,000 who selects 100:1 leverage for a derivative transaction will have a notional transaction value of $500,000 and will be regarded as a wholesale client. Similarly, a number of different derivatives (short or long) can be aggregated together to meet the $500,000 threshold...
The protection was not the point I was referring to. Protection is crap as a professional client under ESMA as well and of course worse compared to a retail client.

But the necessary capital threshold alone will exclude most potential clients as long as I am not missing something here.
Quoting Drolph
{quote} The protection was not the point I was referring to. Protection is crap as a professional client under ESMA as well and of course worse compared to a retail client. But the necessary capital threshold alone will exclude most potential clients as long as I am not missing something here.
Point im tryint to make is leverage can be used to hit the 500k threshold. In essence. A retail needs only 5k to be considered wholesale @ 100 leverage
Quoting Bicarus
{quote} Point im tryint to make is leverage can be used to hit the 500k threshold. In essence. A retail needs only 5k to be considered wholesale @ 100 leverage
Ah, that is a deal breaker - I did not get that difference. Thanks, Bicarus.
This would in fact provide a feasible solution for this annoyance.

Do you have any sources or examples of brokers already applying this?
Quoting Bicarus
{quote} from what i have gathered. brokers are moving overseas ex esma/prc clients under the "wholesale client" umbrella. not the same level as protection as a retail but that is the cost if one wants to use a au broker. being a wholesale client one would also be able to maintain leverage. should asic's next move be to cut it.
A true PoP will likely not on-board a wholesale client with less than $20k deposit. The minimums are usually much higher for API access: 50-100k. What these guys want is volume.

But don't worry, the legit Au brokers will not go down without a fight or a plan B. Let's wait a week or two when the legal advice is all sought out and extensions are requested.
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