Australia’s financial markets regulator has proposed extending retail leverage restrictions to crypto-settled derivatives after finding that 68% of retail CFD clients lost money in the 2023–24 financial year.
The Australian Securities and Investments Commission (ASIC) said on Oct. 12 that it wants qualifying derivatives settled through digital assets to be brought under the country’s existing contracts-for-difference (CFD) rules. The move is intended to close a regulatory gap allowing economically similar products to face different restrictions.
Retail CFD losses exceeded A$458 million ($325 million) during the period, including A$73 million in fees. The figures cover CFD trading across all asset classes and do not relate solely to cryptocurrency derivatives.
ASIC is also proposing a 10-year extension of its existing investor protections, keeping them in place until 2037 if approved by the government. The current CFD intervention order is due to expire on May 23, 2027.
Under the present rules, CFDs are generally covered when trades are settled in cash or through offsetting obligations between counterparties. Similar contracts settled through transfers of digital assets may fall outside the existing product intervention order.
ASIC wants qualifying digitally settled contracts included regardless of whether they are linked to cryptocurrencies, traditional assets, interest rates or market indices. Affected brokers and derivatives platforms could therefore have to comply with leverage limits, standardised margin close-out arrangements, negative balance protections and restrictions on promotional incentives.
The applicable leverage limit would depend on the underlying exposure and the structure of the contract, rather than automatically applying the cryptocurrency cap to every product settled using digital assets. Cryptocurrency CFDs currently carry a maximum retail leverage of 2:1, requiring investors to provide at least half the position’s value as initial margin. The limits for other contracts range from 5:1 for shares to 30:1 for major currency pairs. Some fixed-expiry crypto futures and options would remain outside the framework.
ASIC Commissioner Alan Kirkland said the existing restrictions had significantly reduced investor harm, particularly by curbing excessive leverage. In the first six months after the protections began in March 2021, aggregate quarterly retail losses fell 91%, from A$372 million to A$33 million. Quarterly margin close-outs also declined by 87%, although later reviews found that most retail CFD investors were still losing money.
The proposed changes would also require brokers to calculate initial margin separately for each CFD. A sector-wide investigation found that some firms offset customers’ opposing positions to reduce collateral requirements. ASIC said action over those margin-netting practices led 28 issuers to refund more than A$36 million to retail customers.
Further proposals concern CFDs linked to options. ASIC found that 85% of retail clients trading those products lost money in 2023–24 and is seeking evidence on contracts that could result in losses greater than the options premium, including structures with potentially unlimited downside. It has not yet decided whether such products should face tighter restrictions or be banned.
Promotional discounts would have to be offered to retail customers on substantially equal terms and displayed prominently on brokers’ websites and trading platforms. Firms would need to retain records of qualifying discounts for seven years after they ended, while ensuring educational and research tools were not used to promote prohibited trading.
ASIC is seeking submissions from brokers, trading platforms and consumer groups by Nov. 9 on the products affected, compliance costs and any need for a transition period. The proposed amendments remain subject to consultation, and their final scope could change.
