The Australian Competition and Consumer Commission has authorised the Australian CFD Forum to implement several proposed best practice standards in the provision of contracts for difference (CFD) for five years.
The Australian CFD Forum comprises CMC Markets Asia Pacific Pty Ltd, GFT Global Markets UK Limited and IG Markets Limited.
CFDs are essentially a leveraged bet on future changes in the market price of a share or commodity, or the value of an index or a currency exchange rate. CFDs are a highly leveraged derivative product marketed to and traded by retail investors.
Broadly, the proposed standards have been developed by the Australian CFD Forum to raise the level of compliance with existing regulatory guidance and in some cases, to go above the regulatory benchmarks.
The proposed standards cover topics such as advertising and promotional material, the protection of client money and credit risk monitoring, minimum capital adequacy requirements and due diligence requirements for dealing with intermediaries.
“CFDs are a high risk and complex financial product. The proposed standards are likely to result in enhanced consumer protection for those people who choose to invest in CFDs” ACCC Deputy Chair Delia Rickard said.
“The ACCC’s determination is not an endorsement of CFDs as an investment strategy or of a particular model for issuing CFDs. The determination should also not be seen as advocating any particular regulatory standard to apply to CFDs,” Ms Rickard said.
Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.
Further information about the applications for authorisation, including a copy of the ACCC's determination and public submissions, is available on the public register.
