Australia's financial regulator, the Australian Securities and Investments Commission (ASIC), has proposed expanding its retail leverage restrictions to include crypto-settled derivatives. The move aims to close a regulatory gap that allows similar financial products to face different restrictions, following significant losses among retail traders. ASIC reported that 68% of retail contracts-for-difference (CFD) clients lost money during the 2023-24 financial year, with combined losses exceeding A$458 million, including A$73 million in fees.
The proposed changes would extend existing CFD rules to qualifying derivatives settled through digital assets, regardless of their underlying exposure. This includes contracts linked to cryptocurrencies, traditional assets, interest rates, or market indices. The regulator aims to eliminate distinctions based on settlement methods, ensuring that all economically similar products face the same leverage restrictions and investor protections.
ASIC Commissioner Alan Kirkland highlighted that existing restrictions have significantly reduced investor harm, particularly by limiting excessive leverage. After the protections took effect in March 2021, aggregate quarterly retail losses declined by 91%, from A$372 million to A$33 million. The regulator also recorded an 87% reduction in quarterly margin close-outs, although most retail CFD investors continued to lose money.
The proposals also target margin-netting practices, requiring brokers to calculate initial margin separately for each CFD. This change follows a sector-wide investigation that identified firms offsetting customers' opposing trading positions to reduce collateral requirements. ASIC's intervention led 28 issuers to refund over A$36 million to affected retail customers. The regulator is seeking industry feedback by November 9, with the existing CFD intervention order set to expire on May 23, 2027.