The Australian Securities and Investments Commission (ASIC) proposed on Oct. 12 to extend retail leverage restrictions to derivatives settled in digital assets. The regulatory effort follows agency findings that 68% of retail contract-for-difference (CFD) accounts incurred aggregate losses of A$458 million ($325 million)—including A$73 million in fees—during the 2023–24 financial year.
Closing the Digital Settlement Loophole
Under ASIC's current product intervention order, leverage caps primarily cover CFDs settled in cash or offset obligations. However, brokers have increasingly offered functionally identical derivatives settled through digital asset transfers, leaving them outside the existing intervention framework. The proposed amendment brings qualifying digitally settled contracts under regulatory leverage caps, regardless of whether the underlying benchmark is cryptocurrency, traditional shares, interest rates, or stock market indices.
Under the existing rules, retail crypto CFDs are capped at a 2:1 leverage ratio, requiring investors to supply at least 50% of the position value as initial margin. Limits for other assets range from 5:1 for shares to 30:1 for major foreign exchange pairs. Certain fixed-expiry crypto futures and options contracts will remain excluded from the expanded restrictions.
ASIC Commissioner Alan Kirkland emphasized that original CFD intervention rules introduced in March 2021 initially reduced aggregate quarterly retail losses by 91%, falling from A$372 million to A$33 million, while quarterly margin close-outs dropped 87%. To maintain these investor protections, ASIC seeks to extend the CFD order for ten years until 2037, beyond its current expiration date of May 23, 2027.
Margin Netting Crackdown and Options Risks
The regulator is also addressing broker margin calculations. An ASIC investigation revealed that brokers were offsetting opposing customer trading positions to lower collateral requirements. Following regulatory intervention, 28 issuers refunded over A$36 million to retail clients. The proposed changes explicitly require brokers to calculate minimum initial margin separately for each CFD position.
Additionally, ASIC highlighted severe retail losses in options-linked CFDs, where 85% of accounts lost money in 2023–24. The regulator is evaluating whether to restrict or completely prohibit complex structures that expose retail traders to losses beyond their initial option premium. Public feedback on the proposals is open until Nov. 9, while brokers will also be required to retain promotional discount records for seven years.
- Retail Trader Losses: 68% of CFD traders lost A$458M ($325M) in 2023–24, including A$73M in trading fees.
- Leverage Restrictions: Crypto-settled CFDs face a 2:1 leverage cap requiring 50% initial margin.
- Enforcement Refunds: 28 issuers returned over A$36M to clients over improper margin-netting practices.
- Regulatory Extension: ASIC proposes extending intervention protections through 2037, with feedback open until Nov. 9.
Why It Matters
ASIC's push reflects a growing international regulatory trend aimed at closing structural gaps between traditional leverage products and digital asset settlements. Similar to strict enforcement actions seen in other jurisdictions, such as South Korea's asset freezing authority, regulators are working to prevent financial firms from bypassing leverage rules. While these caps aim to prevent catastrophic retail wipeouts seen during major crypto market liquidation events, tighter domestic limits could push high-leverage retail volumes toward unregulated offshore platforms.
