Australian regulator, ASIC, recently released proposed changes regarding the way the brokers operate in the country, and it already received numerous responses, some of which even came from major firms.
Recently, the Australian Securities and Investments Commission (ASIC) published new rules for the country’s brokers. The Thursday announcement put a strict limit to the extent to which Australian brokers can increase their retail clients’ bets via CFDs.
As expected, the sudden change in rules and what is allowed and what is not caused quite a strong reaction. The country’s regulator received an entire flood of various responses.
The first reactions
According to the regulator, the new limitations are necessary, as the brokers are selling risky investments to investors, many of which are not experienced and careful enough to protect themselves. They trust their brokers, which could lead them to financial ruin.
Even Plus500 reacted to the changes, although with claims that the company has already been operating in compliance with these restrictions before they were even created.
The firm’s CEO, David Zruia, said that Plus500 welcomes the new regulations. The company is already following the majority of the rules, with the intention to become fully compliant with the proposed regulation as soon as possible. Fortunately, this firm does not have to model its business too much to adapt, which is likely good news for its clients.
The CFD provider, based in Israel, also noted that the new rules are not that different from the ESMA (European Securities and Markets Authority) rules, which were implemented in 2019.
Despite the positive stance towards the regulatory change, it is believed that Plus500’s profits from Australian clients will be significantly affected. The changes include strong leverage limits, negative balance protection, margin closeout rules, and more.
How will the changes impact businesses’ revenues?
Until now, Plus500’s profits from Australian clients accounted for around 15% of the company’s total revenues for 2019. The first step for the firm is to have its board assess how the limitations could impact its business in Australia in the following years.
However, the board believes that the impact that the regulatory change might have was already included in the forecast for the fiscal year 2021. Therefore, there should not be any major changes in the forecast, once the official changes are added to the calculations.
IG Group and CMC Markets, which are the largest UK spread-betting firms, also revealed their own thoughts on the regulatory change in Australia. The companies noted that they should not be impacted too much, as they are well prepared. There will undoubtedly be a small financial impact on their business, but the firms feel confident about being able to continue providing their services, regardless.
CMC Markets went even further to reduce the fear of these changes, noting that the overall impact on profitability would be softened due to the fact that the company focuses on high quality, experienced clients. Meanwhile, the IG group noted that the measures will not change the core markets’ revenue growth targets.