ASIC’s CFD product intervention order extended for five years

ASIC has extended its product intervention order imposing conditions on the issue and distribution of contracts for difference (CFDs) for a further five years to 23 May 2027.

Since 29 March 2021, the product intervention order has strengthened protections by reducing CFD leverage available to retail clients and by targeting product features and sales practices that amplify retail clients’ CFD losses. ASIC’s extension of the product intervention order ensures that CFD protections in Australia remain in line with those in force in comparable markets elsewhere.

ASIC also released Report 724 Response to submissions on CP 348 Extension of the CFD product intervention order. The report summarises ASIC’s analysis of the impact of the order, using data from over 60 CFD issuers. It highlights the key issues raised in submissions to Consultation Paper 348 Extension of the CFD product intervention order (CP 348) and details ASIC’s responses to those issues.

ASIC found that the product intervention order has been effective in reducing the risk of significant detriment to retail clients resulting from CFDs. For instance, ASIC observed during the order’s first six months of operation:

  • a 91% reduction in aggregate net losses by retail client accounts (from $372 million to $33 million aggregate net loss per quarter on average)
  • 51% fewer loss-making retail client accounts per quarter on average
  • an 87% decrease in margin close-outs affecting retail client accounts per quarter on average
  • an 88% reduction in negative balance occurrences for retail clients per quarter on average.

© Australian Securities and Investments Commission. Reproduced with permission.