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ASIC deals massive blow to Australian CFD industry

  • #61
  • Edited 4:29am Jan 19, 2020 2:54am | Edited 4:29am
IMO
ASIC and others are not going far enough.
In addition to further regulations, It would make a lot of sense that anyone wanting to engage in speculating in the forex would need to pay a license fee. This way the barrier would be raised higher to keep the public away from financial ruin.
The money collected from the license fee could be used to educate the wannabe forex millionaire with true facts, offer rehabilitation solution and suicide prevention.
Also a warning message should be apparent in the same way that you see today for tobacco products.
For exemple: "You will lose money if you trade in retail forex": every communication from brokers and "shovel peddlers" should carry this message in bold letters.

Example of a water mark mandatory on all broker, trading system vendors, signal providers ... etc account statements, invoices and letters and web site and advertising.

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  • #62
  • Jan 19, 2020 4:35am Jan 19, 2020 4:35am
Quoting Mingary
IMO ASIC and others are not going far enough. In addition to further regulations, It would make a lot of sense that anyone wanting to engage in speculating in the forex would need to pay a license fee. This way the barrier would be raised higher to keep the public away from financial ruin. The money collected from the license fee could be used to educate the wannabe forex millionaire with true facts, offer rehabilitation solution and suicide prevention. Also a warning message should be apparent in the same way that you see it today for tobacco products....
Why only exclude the "public" from the risk of financial ruin and self harm?

I think it unfair that only professionals ought to be granted this privilege.

By the way, how many times has anyone not seen those legislated warnings, anyway. Gotta be blind drunk if you miss them.
  • #63
  • Jan 20, 2020 3:30am Jan 20, 2020 3:30am
Not sure if anyone here is following the USGFX case https://financefeeds.com/mind-gap-li...ve-episode-79/
  • #64
  • Jan 21, 2020 12:07am Jan 21, 2020 12:07am
Quoting LeoMarchegi
Not sure if anyone here is following the USGFX case https://financefeeds.com/mind-gap-li...ve-episode-79/
The author of that spray is not qualified to interpret nor give comment on the proceedings. Travel restrictions are at issue, with some justification.

quote

that it “doesn’t appear to correspond with the order that was made earlier this morning concerning USG because it provides for leave to give any securities broking firm or futures broking firm with which any of the defendants operates any accounts and notice.”

Thus, the judge explained that they were able to go and get their passports and be free to travel.

unquote

How did the author arrive at that conclusion?
  • #65
  • Jan 21, 2020 1:21am Jan 21, 2020 1:21am
There are so many other things that could be done to help traders rather than decreasing leverage available to them.

A good start would be:

1) In most brokers PDS they state how xyz can change, or your account can be frozen, etc "at any time" and "at their sole discretion". This should be changed and heavily regulated to be in line with banks duty of care to act somewhat in good faith.

2) Maximum spreads should be regulated - no more 100 pip spreads at close of market / during news events. Seriously this should be criminal when dealing with such large leverage. There must be more regulation in spreads.

3) Swaps should be more heavily regulated - I know swaps change daily based on supposed "liquidity" and of course interest rates but there is no transparency here. Forex companies should be forced to have a 1:1 ratio of long / short swaps. eg: EURUSD swap short is 0.5 pips, then EURUSD swap long cannot be more than -0.5, or at least something more reasonable. Some trading instruments have 10x the cost to hold a position overnight compared to swaps paid. Why?

4) Swap-free accounts should be offered to anybody, you shouldn't have to provide a letter from your mosque to say that you are Muslim to open such an account. Seriously? This is a blatant discrimination case waiting to happen. Imagine having a "Catholics only" account!?To be fair - Pepperstone does allow you to open swap-free accounts, no questions asked, and you can trade them simultaneously with normal accounts. Admin fee only payable after a position is open for 10 consecutive days. I tried to open a swap free account with IC Markets and they wanted a letter from my local Mosque...

5) If you must curb leverage, rather than making higher leverage available only to high net-worth individuals, you could have a "Provisional" system for new traders. Eg: a new trader / account might have its leveraged locked for at least 6 months / 1 year to 1:50 and after that he/she can have their leverage increased if theyre trading profitably. That way they can get a handle on whether or not they know what they are doing...

I'm sure a few other people have some opinions on other unsavoury practices that could/should be abolished in the forex industry without curbing leverage?
  • #66
  • Edited 12:57am Jan 23, 2020 12:31am | Edited 12:57am
Quoting Mr4x86
There are so many other things that could be done to help traders rather than decreasing leverage available to them. A good start would be: 1) In most brokers PDS they state how xyz can change, or your account can be frozen, etc "at any time" 2) Maximum spreads should be regulated 3) Swaps should be more heavily regulated 4) Swap-free accounts should be offered to anybody, you shouldn't have to provide a letter from your mosque to say that you are Muslim 5) If you must curb leverage, rather than making higher leverage available only to high net-worth...
Two things. (I have cut down some of your quote, without loss of substance, I think).

The industry is *very* competitive. You have some terrific ideas - indeed, point 5 may be a marketing angle for "better" services due to greater broker prudence - or is that too nuanced? Should you find your service not to your satisfaction, simply do some research and change brokers.

Without reading up on the relevant Corporations Laws and constituent powers, I find it improbable that ASIC can, and nor should it, regulate many of your concerns.

By the way, I am surprised that only "most" brokers are included in your first point. I reckon that should read "all". Show me a broker who lets their clients accounts run into deficits to trade CFDs and I'd run for the hills. "banks duty of care to act somewhat in good faith" - a CFD broker has a much higher standards, and they go to jail. Unlike bankers after the recent Royal Commission, bankers were given a bit of a fine and a slap for absolutely disgusting and criminal practices. Long may the Australian cartel live.
  • #67
  • Jan 23, 2020 3:28am Jan 23, 2020 3:28am
Thanks for your insight Lloyd

I should probably be a little more specific with regards to point 1. If you read the fine print you will see that brokers can reverse your trades if they think you were somehow "cheating" them, they can change things like swap-free admin-charge-free periods, admin charges etc on a whim and at their discretion, which may put you in a very vulnerable position if you're playing with big money and not in a position to close in positive equity just yet... They can also take from your account to cover the losses of other people's accounts, say in the event of a black swan even like the CHF un-peg, even if you didn't have a trade on.

One of the recommendations from the ASIC review was to make available, in the trading platform, the interest charges that traders would face over a year (I'm guessing via swaps) - a feature that is not actually built in to MT4 or cTrader. If they want to make a suggestion like that, then it's not a long bow to draw to ask them to be more reasonable with positive and negative swaps. Of course they do it to stop people from benefiting from triangular arbitrage, but if they are collecting their commission, the swap charge is being forwarded on to whoever is taking the other side of the trade, and your profits are being taken from someone on the other side of the trade, then why should it matter to the broker if you are just setting up a positive swap arbitrage anyway? But I digress...

You are right about Australian banks, their behaviour is truly abhorrent but the politicians at the top of the food chain allow their behaviour because Australia's whole economy is currently relying on the housing bubble being propped up. So anything that could jeopardise that gets canned - even if its to the detriment of the Australian people. Disgusting but sadly true...

Anyway they were just a few of my ideas, hopefully some smarter people than me might have some better ones. But I won't hold my breath that anyone from ASIC will actually come up with anything smart since the toothless tiger is essentially allowing wholesale money laundering out of China through Australian real-estate, but again I digress...
  • #68
  • Jan 23, 2020 7:32am Jan 23, 2020 7:32am
Quoting Mr4x86
Thanks for your insight Lloyd
Anyway they were just a few of my ideas, hopefully some smarter people than me might have some better ones. But I won't hold my breath that anyone from ASIC will actually come up with anything smart since the toothless tiger is essentially allowing wholesale money laundering out of China through Australian real-estate, but again I digress...
Lots of good stuff there. Again I chop your quote without any loss of substance. Just jokin!! It was a bit long to post in full.

Absolutely fine to digress. Kinda fun.

I may have to sleep on this. That is when I think best, you know.

An idea of my own - trade futures. There are often minis - may depend on your broker. They avoid pretty much all the problems associated with CFDs, which, in my opinion, are fraught with issues, including being really expensive to trade and *many* other things that are troubling.

Edited out my own digression - for another thread.
  • #69
  • Jan 23, 2020 7:58am Jan 23, 2020 7:58am
Quoting LloydOz
{quote} Lots of good stuff there. Again I chop your quote without any loss of substance. Just jokin!! It was a bit long to post in full. Absolutely fine to digress. Kinda fun. I may have to sleep on this. That is when I think best, you know. An idea of my own - trade futures. There are often minis - may depend on your broker. They avoid pretty much all the problems associated with CFDs, which, in my opinion, are fraught with issues, including being really expensive to trade and *many* other things that are troubling. Edited out my own digression...
Micro Mini Futures Indices for example
https://www.ampfutures.com/trading-info/margins/
every Saint has a past. Every Sinner has a Future
  • #70
  • Edited 8:50am Jan 23, 2020 8:27am | Edited 8:50am
Quoting turnip15
{quote} Micro Mini Futures Indices for example https://www.ampfutures.com/trading-info/margins/
Quite so! Micro e-mini! Some were introduced just last year. That's more than enough to keep any mere mortal flat out.

And hey, look at all the available platforms, eh? (On another tab)

Some may be expensive, but for most people the freebies would be better than than the stick in the eye to which they have become accustomed with CFDs, without naming names. My own has its own freebie (including data, which might otherwise be prohibitive for many), which isn't listed there, but is super good.

Plus, could trade options, which is another digression.
  • #71
  • Jan 23, 2020 1:12pm Jan 23, 2020 1:12pm
I think that the risk warnings like "Past performance is no guarantee of future results" are more than enough.

If some do not understand the meaning of "risk"... I think they should stop taking heavy drugs.

first you develop a strategy, optimize the entry/exit points, THEN you forwardtest it on a small account. sounds obvious to me.


high leverage is a problem IMO, because it's easy to lose your mind especially when you're on a losing streak

WHY DO YOU NEED MORE THAN 1:30.. tell me one reason other than "I love gambling".
  • #72
  • Jan 23, 2020 11:31pm Jan 23, 2020 11:31pm
Quoting HeyYou
I think that the risk warnings like "Past performance is no guarantee of future results" are more than enough. If some do not understand the meaning of "risk"... I think they should stop taking heavy drugs. first you develop a strategy, optimize the entry/exit points, THEN you forwardtest it on a small account. sounds obvious to me. high leverage is a problem IMO, because it's easy to lose your mind especially when you're on a losing streak WHY DO YOU NEED MORE THAN 1:30.. tell me one reason other than "I love gambling".
I can tell you why.. Because some people have strategies that are very low risk but also very low reward, which means huge margins are needed. So now instead of being able to make x amount of dollars with a 5k account, I might need to have a 50-100k account to fund the same positions.... and I definitely don't feel comfortable putting a deposit on a house into a broker that can just chop and change the rules and essentially use you as a "bail in" creditor any time they feel like...
  • #73
  • Jan 23, 2020 11:54pm Jan 23, 2020 11:54pm
Quoting HeyYou
I think that the risk warnings like "Past performance is no guarantee of future results" are more than enough. If some do not understand the meaning of "risk"... I think they should stop taking heavy drugs..
...and the ones who actually comply have a couple lengthy paragraphs. You say heavy drugs, recently I said something about being blind drunk.

On another level, the wording is actually ambiguous. There is or will be a case in the Oz High Court which may consider what beyond reasonable doubt means. At trial, they took that to mean not impossible. Thinking about it for more than a nanosecond may result in brain pain, but they are quite different.

Same with the past performance wording - what does it *actually* mean? Well, it may mean whatever I think it means. Not good enough.
  • #74
  • Jan 24, 2020 1:40am Jan 24, 2020 1:40am
Quoting Mr4x86
{quote} I can tell you why.. Because some people have strategies that are very low risk but also very low reward, which means huge margins are needed. So now instead of being able to make x amount of dollars with a 5k account, I might need to have a 50-100k account to fund the same positions.... and I definitely don't feel comfortable putting a deposit on a house into a broker that can just chop and change the rules and essentially use you as a "bail in" creditor any time they feel like...
I totally understand that. but 1:30 should be already very high man....
  • #75
  • Jan 24, 2020 1:55am Jan 24, 2020 1:55am
Quoting HeyYou
{quote} I totally understand that. but 1:30 should be already very high man....
Maybe for some, but I'm already running a pretty airtight hedge that I take profits on when it hits +$300 equity, and I'm using ~$1700 in margin for said hedge on a 1:500 account. Imagine what the margin cost would be to make the same trade if I was restricted to 1:30 just to make a couple hundred bucks...
  • #76
  • Jan 24, 2020 2:08am Jan 24, 2020 2:08am
Quoting Mr4x86
{quote} I can tell you why.. Because some people have strategies that are very low risk but also very low reward, which means huge margins are needed. So now instead of being able to make x amount of dollars with a 5k account, I might need to have a 50-100k account to fund the same positions.... and I definitely don't feel comfortable putting a deposit on a house into a broker that can just chop and change the rules and essentially use you as a "bail in" creditor any time they feel like...
Unlike HeyYou, I don't understand. Define "low risk" in the context of trading. If anyone thinks the answer ought to be obvious to blind freddie, I can't help you.

Anyway, that's not the point. I think the real issue here is the uncomfort with depositing 50K with a broker.

This is not unjustified with some real crooks in the trade. Halifax NZ (anyone can google, it is quite public) was one outfit I was considering placing some dosh with just a couple months before the shite hit the fan. Phew, for me. I'm not sure what to do about that. Laws are in place to ensure client funds are segregated. Maybe we need more transparency on that. No, not maybe, we must.
  • #77
  • Jan 24, 2020 5:48am Jan 24, 2020 5:48am
Quoting LloydOz
{quote} Unlike HeyYou, I don't understand. Define "low risk" in the context of trading. If anyone thinks the answer ought to be obvious to blind freddie, I can't help you. Anyway, that's not the point. I think the real issue here is the uncomfort with depositing 50K with a broker. This is not unjustified with some real crooks in the trade. Halifax NZ (anyone can google, it is quite public) was one outfit I was considering placing some dosh with just a couple months before the shite hit the fan. Phew, for me. I'm not sure what to do about that. Laws...
Low risk for me = hedging a nearly perfectly correlated pair which does not stray from 90-100% correlation over time, thus capturing profits when the correlation reduces very slightly in your favour, whilst having plenty of margin to accommodate the slight equity drawdown while its not in your favour. I don't want to say too much on that because I'm worried my broker might find a way to "fix" it so that I cannot profit this way anymore...

But yes, if I had more confidence in the regulation of how forex brokers behaved, rather than just kerbing leverage, then I might feel more comfortable putting as much money with them as I would keep in a bank account..

The next issue is the government shouldn't be telling people how to spend / invest their own damn money! None of their business... meanwhile pokies are still legal and proliferated in every bar in all Australian states except W.A. (where I live), where a lot of people have lost 100's of thousands over their lifetimes, lose families, commit suicide, yet thats all fine because it helps out the local community somehow?
  • #78
  • Jan 24, 2020 6:53am Jan 24, 2020 6:53am
[quote=Mr4x86;12718970]{quote} Maybe for some, but I'm already running a pretty airtight hedge that I take profits on when it hits +$300 equity, and I'm using ~$1700 in margin for said hedge on a 1:500 account. Imagine what the margin cost would be to make the same trade if I was restricted to 1:30 just to make a couple hundred bucks...[/quote]

how much do you risk per trade ?

anyways, good luck with that.
  • #79
  • Edited 7:19am Jan 24, 2020 6:57am | Edited 7:19am
Quoting Mr4x86
{quote} Low risk for me = hedging a nearly perfectly correlated pair which does not stray from 90-100% correlation over time, thus capturing profits when the correlation reduces very slightly in your favour, whilst having plenty of margin to accommodate the slight equity drawdown while its not in your favour. I don't want to say too much on that because I'm worried my broker might find a way to "fix" it so that I cannot profit this way anymore... But yes, if I had more confidence in the regulation of how forex brokers behaved, rather than just kerbing...
Thankyou for sharing that low risk play - yep, now I understand. Personal anecdote - the bond traders in a funds management outfit I worked with would do that kinda stuff daily with too many zeros to count. Seven day settlement which never happened - now that's leverage. Wasn't much in it per trade - it does add up over a year. Maybe a single percent or two better than the competition, consistently - but that's the difference between genius and looking for another job.

I'm guessing that many traders err on the side of a libertarian view of things.

Pokies have totally buggered things on so many levels as you describe, I agree. In Victoria, local communities - regional towns - suffer a lot. The publican may get a few bucks, but the rest goes to State coffers. No regulation at the user level as far as I am aware of. WA is wise, I didn't know that - although I have briefly stepped foot in the casino. Not tempted one little bit.
  • #80
  • Jan 24, 2020 7:06am Jan 24, 2020 7:06am
Quoting LloydOz
{quote} ...and the ones who actually comply have a couple lengthy paragraphs. You say heavy drugs, recently I said something about being blind drunk. On another level, the wording is actually ambiguous. There is or will be a case in the Oz High Court which may consider what beyond reasonable doubt means. At trial, they took that to mean not impossible. Thinking about it for more than a nanosecond may result in brain pain, but they are quite different. Same with the past performance wording - what does it *actually* mean? Well, it may mean whatever...
If you mean that we can never be sure about anything, I agree.. or maybe not.. I'm not sure.
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