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ASIC’s Product Intervention Order – no changes required for reporting through TRAction

ASICs-Product-Intervention-Order-is-in-Force

The commencement of ASIC’s Product Intervention Order (Order) in respect of CFDs requires no action from you in respect of your OTC derivatives transaction reporting to ASIC. This is because margins received by a broker are not reportable under ASIC’s Rules.

Instead, brokers are only required to report collateral posted to other counterparties, such as a liquidity provider. If you are using a third-party reporting delegate like TRAction, you should send the details of the collateral posted on all trades/positions to your reporting delegate on a daily basis. TRAction usually receives these details from clients in a csv file.

Position sizes and trade volumes are required to be reported to DTCC. TRAction assists clients to fulfil this obligation by:

  • receiving data that is inclusive of contract size, or
  • calculating volumes and valuations on behalf of the client upon receiving contract size settings and quantities in lots.

What’s changing?

The requirements of the Order are summarised below:

  1. Reduced maximum leverage – ASIC aims to standardise CFD issuers’ margin close-out arrangements which will act as a circuit breaker to close-out one or more retail CFD positions held by a retail client before all or most the client’s investment is lost;
  2. Increased trade protection – protection against negative account balances by limiting a retail client’s CFD losses to the funds in their CFD trading account; and
  3. No promotional inducements – prohibiting the giving or offering of certain inducements to retail clients such as additional trading credits and rebates or ‘free’ gifts like iPads.

Why is this happening?

The Order was introduced by ASIC to strengthen consumer protections in the CFD market, will be in force next Monday on 29 March 2021. The Order will reduce the CFD leverage available to retail clients by cracking down on CFD product features and marketing practices designed to amplify retail clients’ CFD losses.

The Order aims to not only reduce the size and speed of clients’ losses by reducing CFD exposure and sensitivity to market volatility but bring Australian practice into line with the protections enforced in comparable markets elsewhere including the UK and EU.

If you are concerned with how ASIC’s Product Intervention Order will affect your OTC derivative trade reporting requirements, please contact us.

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Sophie Gerber

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Sophie Gerber

Sophie works in our Sydney office. She is co-CEO and founder of TRAction and focuses on assisting clients in Australia, Europe and Asia to meet their regulatory requirements with trade and transaction reporting solutions as well as development of the best execution platform. She has extensive experience in providing compliance and legal services to Australia’s financial services and credit participants. Her vast experience coupled with in-depth knowledge of business practicalities, regulatory compliance and financial services laws allow her to effectively and efficiently engage with clients.