Australian CFD Brokers

Regulation of Australian CFD Brokers

This article discusses the state of the Australian CFD market, how regulation of the market is carried out and how this factor affects the market players in that industry.

Contracts-for-Difference instruments first hit the scene in Australia in March 2002, when CMC Markets and the IG Group made the entry into this market three months apart from each other. Several studies have shown that CFD trading is now the most popular mode of financial investments in Australia, trumping numbers obtained from the forex market. This popularity peaked in 2007 when a mad rush of foreign CFD trading providers engaged the Australian marketplace.

Today, it is estimated by research firm Investment Trends that close to 40,000 Australians trade CFD instruments in one form or the other, with a valuation of more than $350 million. The number of traders has thus increased by more than 400% from their 2005 figures. Presently, more than 35 CFD companies are currently operating in Australia, and all are subject to regulation by the Australian Securities and Investment Commission (ASIC).

Top 5 Australian CFD Brokers:

1
Min. Deposit
$10
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Our score
10
55+ currency pairs available
Trade on a trusted platform
24/7 support via live chats, email or phone call
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Description:
LonghornFX is a true ECN STP broker dedicated to delivering a superior trading experience to traders no matter their level of experience. Their services are based on transparency, innovation and efficiency, ensuring an unparalleled trading experience for all.
Payment Methods
Credit Card, Debit Card, Visa, Bitcoin
Full regulations list:
LonghornFX offers high-leverage trading on a wide variety of assets. Trading with leverage carries a degree of risk which may result in losing more than your investments. Clients should practise risk management to protect themselves from losing more than they can afford when trading with leverage.
2
Min. Deposit
$10
Exclusive promotion
Our score
9.3
0% Commission Account
Low Spreads
Eco-Account Option
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Description:
CedarFX is an eco-conscious broker offering 0% commission trading on 170+ assets, including Forex, Cryptocurrency Pairs, Stocks, Indices and Commodities. With up to 1:500 leverage, no-fee transactions and low spreads, traders can make the most of their funds. CedarFX also offers an Eco Account option to support tree planting and sustainability projects.
Payment Methods
Bitcoin, Credit Card, Debit Card
Full regulations list:
Please ensure that you fully understand the risks involved, taking into account your investments objectives and level of experience, before trading, and if necessary seek independent advice.
3
Min. Deposit
$200
Exclusive promotion
Our score
8.7
Join the Social Trading revolution. Connect with other traders, discuss trading strategies, and use our patented CopyTrader
eToro is the world’s leading social trading platform, offering a wide array of tools to invest in the capital markets
Largest number of currency pairs to trade
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Description:
eToro is a multi-asset investment platform with more than 2000 assets, including FX, stocks, ETF’s, indices and commodities. eToro offers a wide range of currency pairs and other trading instruments. eToro users can connect with, learn from, and copy or get copied by other users.
Payment Methods
Wire Transfer, Bank Transfer
Full regulations list:
CySEC, FCA
Cryptoassets are highly volatile unregulated investment products. No EU investor protection. eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro. Your capital is at risk.
4
Min. Deposit
$10
Exclusive promotion
Our score
8.5
Can fund with BTC
64 global companies including Netflix and Amazon
Free deposits and withdrawals
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Description:
EagleFX is an online digital asset, Forex and CFD broker providing traders across the globe with cutting edge technology to trade the world’s markets. Our focus has been to change the way people trade Digital Assets and Forex. We are driven to provide traders with incredibly low-cost pricing across all Digital assets, FX, stocks, indices, commodities and futures along with industry-leading 24/7 live customer support.
Payment Methods
Credit Card, Debit Card, Bitcoin, Wire Transfer
Full regulations list:
EagleFX offers leveraged trading on a range of assets within its platform. CFD and Spot Forex trading do carry a degree of risk which may result in you losing more than your initial investment. Please ensure you fully understand the risks involved with leveraged trading and ensure this is not detrimental to your personal or institution's financial well being.
5
Min. Deposit
$200
Exclusive promotion
Our score
7.9
BlackBull Markets’ unique feature lies in its stated goal of delivering an “institutional” trading experience to retail clients
No-Dealing Desk Broker (NDD), with Straight Through Processing (STP) all done on a true ECN
State of the art Equinix servers, based in New York (NY4), London (LD5) and Tokyo (TY3)
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Description:
BlackBull Markets is a top-tier, award-winning, and financially registered forex broker with a globally trusted presence. Operating since 2014, BlackBull Markets is now the fastest growing financial services business in New Zealand. We were founded with the goal of becoming the leading online Financial Technology and Foreign Exchange broker. BlackBull Markets is a true ECN, No Dealing Desk brokerage specializing in Forex, CFDs, Commodities, Fibre Optic Communications and Fintech solutions for a global clientele.
Payment Methods
Mastercard, Visa, Bank Transfer, Neteller, Skrill, UnionPay, FasaPay
Full regulations list:
FSPR, FMA New Zealand

Understanding the CFD Trading Industry in Australia

A large chunk of Australia’s CFD market is controlled by CMC Markets and IG Markets. A very small percentage of trading is done on the ASX’s CFD exchange, with the market makers and white-label brokers making up the rest of the numbers.

1 ) The Players

In Australia, the majority of CFD trading is carried out on the proprietary platforms of 4 major providers: CMC Markets, IG Markets, City Index and Macquarie Bank.

commsec

There are also several ‘white-label’ providers; companies which operate under logos of other companies. In this class will come providers such as Halifax Futures, Spectrum Live, ProTrader, Commonwealth Securities (CommSec), Marketech, VBM Capital, WealthWithin, GET Futures, Tolhurst Noall, GT Financial, Adest Trader, First Prudential and Capital Markets Group.

IG Markets offers both a market-maker and direct market access platform. IG Markets is the biggest CFD broker in Australia. Next in line is CMC Markets, which lost its market share to IG Markets a few years ago. Macquarie Prime is the third biggest broker, followed by other companies such as First Prudential Markets, E*Trade, Commsec, City Index, and Tricom.

The ASX offers a CFD service, but this is only patronized by 1% of the market.

2) The Products

Much of CFD trading In Australia is based on index, currency and commodity trading, with a reducing proportion of trades being based on shares listed on the ASX. This can be attributed to some of the hits that the stock market has taken since the days of the global financial crisis.

ontracts for xetra stocks

Contract Specifications for CFDs on German Stocks. Broker: Finam.eu

Status of CFD Trading and Regulation in Australia

So the question is: what is the status of CFD trading and regulation in Australia? A survey shows that nearly half of active traders use the Direct Market Access (DMA) model when trading CFDs. About 52% of traders use the Market Maker model, citing ease of use as the reason for usage. 1% of the CFD trading population in Australia uses the exchange-traded model, preferring to trade CFDs on the Australian Stock Exchange (ASX).

These models all have implications on the regulatory framework at play in the Australian CFD market. All companies offering CFD products are required to be registered under the appropriate category with the Australian Securities and Investment Commission (ASIC).

ASIC has what it terms “client money handling” rules, which guide the way the CFD brokers handle money belonging to its clients. These rules were released in July 2010. Under the tems of the client money handling rules, ASIC requires all CFD brokers in Australia to do the following:

  1. All money in client money accounts operated under margin rules must be put in a segregated or trust account, which protects these monies in case of closure or bankruptcy of the brokerage firm.
  2. All CFD brokerages (also known as AFS licensees) must ensure that only client money, interests on client money or interest on permitted investments using client money/the proceeds of the realization of permitted investments, must be paid into the client money accounts. Brokers are therefore not allowed to deposit their own money into these accounts.
  3. AFS licensees are to clearly and prominently disclose in its Product Disclosure Statement (PDS), information on how they deal with client money and when, and on what basis, it makes withdrawals from client money; and the nature of the counterparty risk for client money used for derivatives.
  4. AFS licensees are also to inform their clients about the counterparty risks they face when they trade CFDs, especially for brokers who operate a market maker model.

Implications for CFD Traders in Australia

In the light of the information provided above, we can therefore see that the following statements are true of CFD trading and regulation in Australia:

  1. There are several CFD brokerages that traders in Australia can choose from, as the market is very well developed.
  2. There is an effective regulatory structure in place.
  3. The client money rules effectively bar the provision of bonuses to trade CFD contracts on Australian client money accounts held with CFD brokers.
  4. Deceptive advertising which overplays the gains and downplays the risks in CFD margin trading is considered illegal by ASIC.
  5. The CFD trades can only cover investments on deposit with an Australian ADI or eligible money market dealer as well as investment in a security issued or guaranteed by the Commonwealth or a state or territory within Australia.
  6. Trading on CFD contracts on foreign assets is not considered illegal, but exchanges are expected to put limitations on foreign assets tradable on their platforms. The policy is to promote increased depth of trading of Australian assets.

Conclusion

CFD trading in Australia has come a long way, and this has permitted a well regulated trading environment to evolve, based on lessons that have been learnt along the way. Traders have a choice of trading CFDs on broker platforms (market-maker and direct market access), as well as on the ASX exchange.

Whichever model of trade is chosen, traders must be careful to ensure that there are no contraventions by their brokers in the way the brokers handle their money. There are rules in place to safeguard their investments.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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