This Tuesday, a commissioner at the Australian Securities and Investment commissions gave a speech in which she discussed the regulator’s views on the retail trading industry. There was nothing particularly controversial in the speech offered by Cathie Armour. However, the public has read between the lines and understood that she provided them with some hints regarding what ASIC’s next moves will be. Moreover, the speech contained some hints regarding what are the areas of the over-the-counter derivatives market that the regulator is considering.
What ASIC is looking at?
Similarly to their European counterparts, ASIC is focusing primarily on client losses. Cathie Armour claimed that all 350,000 retail trading clients that use Australian brokers’ services have numerous losses no matter what option they use. The commissioner suggested that clients suffer losses 80 percent of the time with binary options, 72 percent of the time with CFDS and 63 percent of the time when they are trading in foreign exchange.
It is hard to determine exactly why Armour has decided to talk in her speech about client losses. Yet, rumors have it that last time someone highlighted a topic several times, it resulted in stiff regulations that aimed to reduce the problem.
Moving forward throughout her speech, Armour has also mentioned the various regulatory strictures that exist worldwide to control the activities of the brokers. The ASIC commissioner claimed that regulators such as Europe, Japan, China, and North America have either restricted or prohibited the allocation to retail investors with some certain OTC derivatives. Therefore, she concluded that since in Australia there are no similar restrictions, the risk of regulatory arbitrage is highly increased.
ASIC is concerned about how Aussie brokers are doing business
The ASIC commissioner has then touched an even more serious issue regarding the fears of ASIC regarding the way Aussie brokers are doing business with foreign clients. She claimed that the concerns of the regulator are based on the fact that some brokers are somehow trying to mislead their foreign clients about their ASIC license.
To strengthen her point and highlight the concerns that ASIC has, Armour suggested that some licensees, provided by Australian Financial Services, may be making misleading or deceptive statements regarding the scope, the application, or the effect of an AFS license.