Australian entities providing OTC CFDs to retail clients currently do not have specific best execution duties unlike their European Union (EU) counterparts under MiFID II. Australia is likely to be the next regulator to implement these similar requirements due to the ASIC’s release of proposed transparent pricing and execution requirements Consultation Paper 322 Product intervention: OTC binary and CFDs.
We anticipate that these requirements will be rolled out to some ASIC regulated entities later this year and beyond. In fact, these could be finalised and released at any moment.
Condition 8 – transparent pricing and execution
This condition requires CFD issuer to maintain and publish the following:
- CFD pricing methodology – monitor your executions on a regular basis including the effectiveness of the methodology and the fairness of prices; and
- CFD execution policy – explain how the CFD issuer deals with clients’ offers to trade CFDs and effects CFD trades
Sounds complicated and difficult? Don’t worry, you can make it with TRAction’s help!
How we can help?
TRAction’s proprietary Best Execution Monitor makes compliance easy with our data analytics suite.
- Easy connection with TRAction as it uses current data provided for trade reporting;
- Analysis of the quality and pricing of execution by comparing against the market data from the one-minute high and low for the relevant time the trades were executed;
- Easy search of a specific transaction by UTI or deal number;
- Easy-to-understand graphs generated for your selected trades; and
- All trades monitored in a single platform for implementation of a holistic execution policy.
Click here to watch a demo of how it functions!
Time to get ready and be compliant when the order is released so you can use the time for implementing the other requirements under CP322!
When do the regulations apply and who do they apply to?
The pricing and execution requirements will commence 3 months after the day on which the draft Product Intervention Order is registered. While it is not yet clear when these requirements will commence, what is known is that ASIC has every intention to invoke its intervention powers upon the OTC derivative sector despite the chaos of this deadly pandemic this year.
Should the Legislative Instrument be implemented, all Australian Financial Services Licensees who issue CFDs will be required to adhere to its terms.
TRAction currently provides delegated trade reporting services and best execution monitoring services to over 90 financial services firms across Australia and Europe. You can trust that we are experienced.
Contact us for a FREE demo today!
Compliant by design, compliance at a glance.
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.