In anticipation of possible changes to leverage for certain CFD products in Australia, as proposed by the Australian Securities and Investment Commission (ASIC) and following similar restrictions placed on such products in Europe and the UK, the prominent Australian brokerage, Pepperstone has highlighted the flaws of such restrictions and what they could mean for Australian investors in a recent meeting with the Select Committee on Financial Technology and Regulatory Technology of Australia.
During the meeting, Pepperstone CEO, Tamas Szabo pointed out that “when you restrict a product that is available online, clients have a tendency to search for that product elsewhere. There has been a large move of clients to various different jurisdictions offshore where the products are readily available.” Furthermore, “…ASIC have made public statements that they intend to use the power more frequently. I don’t know which products they might have in mind for that but I named a few of them earlier on. They could intervene if they felt it was appropriate rather than engage with the industry to achieve a better outcome.”
At the heart of the issue is the fact that in other jurisdictions, the restrictions on CFD products do not seem to have played a big impact in reducing client losses or risks associated with trading and have, in some respects, led investors to find alternatives overseas, many times in unregulated geographies, where their funds and accounts are not protected in the same way as they would be onshore.
Also, considering the impact that financial scams and fraudulent websites have on the Australian public as of late, it would be prudent to focus on improving the industry locally, so that residents can look forward to an affordable, safe and meaningful trading or investing option, as opposed to limiting access to such services to a select group of “high net worth” clients.