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Extending the Product Intervention Order on CFDs

Friday 22 October 2021

Should the product intervention order against contracts of difference be extended?
This week the Australian Securities and Investments Commission (ASIC) published a consultation paper proposing the extension of the CFD for retail clients until 2031. 
The regulator is seeking feedback from industry before the end of November. 

The current product intervention order will end next May, but the regulator highlighted that during the first three months of this order there were improvements in key metric s and indicators the relating CFDs. 
Highlights as published by ASIC:

  • Reduced retail client losses:
    • retail clients made net losses of $22 million from CFD trading—a reduction to 94% of the quarterly average of $372 million in the year prior to the product intervention order
    • there were 45% fewer loss-making retail client accounts compared with the quarterly average in the prior year, whereas the number of profit-making retail client accounts reduced by only 4% across the same period, and
    • aggregate and average losses made by loss-making retail client accounts also decreased.
  • The proportion of profit-making and loss-making retail client accounts was evenly split at 50%, compared with a quarterly average of 36% profit making accounts and 64% loss-making accounts in the prior year.
  • Margin close-outs, where a retail client’s CFD position(s) are closed before all or most of the client’s investment is lost, decreased by 85%.
  • Negative balance instances reduced tenfold for retail clients.