ROOT
Choice pushes for CFD ban extension
The popular consumer advocacy group has called on the government to stay the course when it comes to CFDs.
Choice pushes for CFD ban extension
The popular consumer advocacy group has called on the government to stay the course when it comes to CFDs.
Choice has called for the federal government to extend and expand the current restriction on how and what contract-for-difference (CFD) products are offered to Australian retail investors.
In a letter to the Australian Securities and Investments Commission (ASIC), Choice said CFDs are precisely the kind of financial products that should be subject to market-wide product interventions from regulators.
Choice warned that “significant consumer harm will eventuate” if the current product intervention order is left to expire.
“If the order is not renewed, consumers would risk potentially losing billions of dollars in CFD losses as seen in 2020,” the consumer advocacy group said.
In countries like the United States, CFD trading is banned for retail investors due to its highly speculative nature.
Locally, Australian regulators have recently escalated their own management of the risks that CFDs can present to everyday investors.
In 2020, ASIC moved to introduce a slew of restrictions on the sale and distribution of CFDs to retail investors.
In the time since, the regulator said that it has observed “significant improvements” in key metrics and indicators of retail client detriment from CFD trading.
Data released by ASIC in October suggested that net losses from CFDs among retail investors fell by as much as 94 per cent of the quarterly average from the previous year as a result of the order.
However, this prohibition is set to expire in May 2022. If it does, Choice expects retail investors to bear the costs.
“CFD issuers would be allowed to resume six unfair trading practices including being able to sell highly-leveraged financial products to retail consumers,” they said.
In anticipation of this, ASIC has proposed an extension of the current restrictions that would see them run on until April 2031.
The regulator has concluded its consultation on this proposal in November 2021, but the next steps remain unclear.
An extension would require the approval of the current federal Minister of Superannuation, Financial Services and the Digital Economy Jane Hume – or whoever replaces her, should the next federal election occur before the order lapses.
In addition to supporting the proposed extension, Choice also advocated for an outright ban of CFDs in Australia.
“Banning the sale of CFDs would bring Australia in line with international best practice in consumer financial protection and create a fairer financial system,” the group said.
RELATED ARTICLES
About the author
About the author
Invest
Investment firm raises $9bn for global special situations fund
Bain Capital secured $9 billion for its latest Global Special Situations Fund, positioning the firm as one of the world's largest special situations investors. Read more
Invest
Morrison Securities unveils plug-and-play global trading access to 15 countries
Equities clearing firm Morrison Securities has partnered with trading technology provider ViewTrade to introduce one of Australia's first plug-and-play global trading solutions, enabling streamlined ...Read more
Invest
Institutional investors react positively to policy stimulus in September
State Street Global Markets has reported a rebound in institutional investor risk appetite in September, driven by supportive policy announcements from central banks. Read more
Invest
AMP partners with Striver for Brimstone event to attract new financial advisers
AMP has announced a partnership with advice community and careers technology platform Striver for the annual Brimstone event series, scheduled to take place in Sydney next week. Read more
Invest
North expands managed portfolio options with new customisation features
North, a leading Australian wrap investment platform, has announced an expansion of its customisation options for managed portfolios, aiming to provide advisers with greater flexibility for their ...Read more
Invest
State Street partners with Taurus to expand digital asset capabilities
State Street Corporation has announced a strategic agreement with digital asset infrastructure provider Taurus SA to enhance its digital asset offerings for institutional clients. Read more
Invest
State Street to provide custody and administration services for Brighter Super's $30 billion in funds
State Street Corporation has been chosen as custodian and administrator for more than $30 billion in funds invested for members of Queensland-based superannuation fund Brighter Super. Read more
Invest
State Street Global Advisors maintains soft landing forecast despite trimmed rate cut expectations
State Street Global Advisors (SSGA) has released its midyear update of the Global Market Outlook, highlighting the resilience of risk assets despite increased uncertainty, stickier-than-expected ...Read more
Invest
Investment firm raises $9bn for global special situations fund
Bain Capital secured $9 billion for its latest Global Special Situations Fund, positioning the firm as one of the world's largest special situations investors. Read more
Invest
Morrison Securities unveils plug-and-play global trading access to 15 countries
Equities clearing firm Morrison Securities has partnered with trading technology provider ViewTrade to introduce one of Australia's first plug-and-play global trading solutions, enabling streamlined ...Read more
Invest
Institutional investors react positively to policy stimulus in September
State Street Global Markets has reported a rebound in institutional investor risk appetite in September, driven by supportive policy announcements from central banks. Read more
Invest
AMP partners with Striver for Brimstone event to attract new financial advisers
AMP has announced a partnership with advice community and careers technology platform Striver for the annual Brimstone event series, scheduled to take place in Sydney next week. Read more
Invest
North expands managed portfolio options with new customisation features
North, a leading Australian wrap investment platform, has announced an expansion of its customisation options for managed portfolios, aiming to provide advisers with greater flexibility for their ...Read more
Invest
State Street partners with Taurus to expand digital asset capabilities
State Street Corporation has announced a strategic agreement with digital asset infrastructure provider Taurus SA to enhance its digital asset offerings for institutional clients. Read more
Invest
State Street to provide custody and administration services for Brighter Super's $30 billion in funds
State Street Corporation has been chosen as custodian and administrator for more than $30 billion in funds invested for members of Queensland-based superannuation fund Brighter Super. Read more
Invest
State Street Global Advisors maintains soft landing forecast despite trimmed rate cut expectations
State Street Global Advisors (SSGA) has released its midyear update of the Global Market Outlook, highlighting the resilience of risk assets despite increased uncertainty, stickier-than-expected ...Read more
