As reported recently by Finance Magnates, the Australian FX regulator, ASIC found no statistically significant correlation between the amount of leverage offered to traders and their incurred losses, putting into doubt the notion that lower leverage will lead to less losses on customer’s accounts.
This caveat comes at a time when the australian regulatory authority is seeking to cap leverage for Forex and CFD products much like has happened in Europe under ESMA regulations. The fact that the data analyzed does not show a significant correlation might be due to the fact that the sample size was low, as indicated by ASIC itself.
Nonetheless, it is important to point out that since new leverage caps have been in place across Europe and the UK, the percentage of customers who lose money, namely the statistics often listed in the website footers of regulated brokers in the region don’t look to have changed in a meaningful, positive way.
This should raise questions about the viability of leverage limits being able to “protect” traders from the risks of margin trading. We would not be surprised if ASIC regulated firms draw objection to new regulations based on insufficient data.