Forex Brokers and Regulatory Info for Australian Residents: Difference between revisions

Revision as of 05:22, 18 March 2021

Brokers for Australians

IMPORTANT: Effective March 28th, 2021, the ASIC has implemented new leverage restrictions and additional retail client protections for brokers regulated by the ASIC and who service Australian residents. This WIKI page is reflecting the broker landscape POST this change.

Australians have two directions they can go when selecting a broker: Locally regulated brokers with local Australians offices, or offshore brokers with no connection to the Aussie regulatory framework.

That means that any broker who might have offshore office that is not affected by the new ASIC rules, but also holds an ASIC license locally, would have to keep their Australian resident clients onshore and service them under the ASIC entity with ASIC set trading conditions.

As stated, local brokers are overseen by the ASIC, Australia's national regulator, and ASIC is responsible for regulating not just forex but most tradable securities in Australia. By choosing an Australian regulated broker, you'll have a local regulatory body to work with should anything go wrong with your broker.

ASIC sets leverage and product restrictions for all regulated brokerages in Australia. ASIC and the Australian retail forex market uniquely classifies all retail forex products (for trading, not delivery,) as CFDs, and thus, there might be some terminology confusion when seeking out information on forex and CFD trading. While not incorrect, given that CFD is a very loose term related to any contractual obligation between two parties on the difference in price of a tracked asset, most literature and marketing from international brokers will define forex trading differently than how a CFD is defined.

The ASIC might sound restrictive, but they also require brokers to offer retail clients quite a bit of protection on their accounts and for their funds. Such protections for retail traders include:

Negative balance protection - In the event that a shock market move or weekend gap creates a negative balance in your account, you will not be responsible for paying it back. You will be zero'd out. This is quite good as it is less common to see such protections offered by brokers in modern times.
Seg funds for client deposits - This is a great practice where brokers are unable to use client funds for operational expenses (happens a lot with unregulated brokers,) and instead have to keep funds separate in a seg fund account at a local Australian bank. This helps shield a client's funds should the broker go out of business.

Leverage is set by the ASIC as follows:

Forex Majors - 30:1
Forex Minors - 20:1
Major Index CFDs and Gold CFDs - 20:1
Other commodity CFDs and Minor Index CFDs - 10:1
Share CFDs and Other Underlying Assets - 5:1
Digital Assets - 5:1

Note: Margin closeout is set at a 50% initial margin rate. That means if you are required to post $100 of initial margin to control a position, once your account equity drops below $50, the position will be liquidated.

Australian residents may opt to qualify for Professional Trader status, where they will lose some client protections (like negative balance protection,) but gain leverage across all assets classes up to 500:1. This is a valid option to Aussie traders who do not wish to take the risk of going offshore and use a foreign broker.

"Onshore" Brokers

Pepperstone AU

Pepperstone was founded in 2010 and quickly grew to become one of the largest forex brokers in the world thanks to execelent execution quality and great customer service. Pepperstone is well regualated and has a history of doing right by their clients.

Regulation: Regulated in Australia by the ASIC (also has entities regulated in the UK by the FCA, in the Bahamas by the SCB, and in Dubai by the DFSA)
Pricing: Competitive spreads of 0-0.2 on Razor ECN account, and average spreads of 1.2 pips on Standard account
Leverage: 500:1 in all regions except for the UK / Europe where FCA regulations set leverage at 30:1
Account Minimums: $200 USD or AUD for all account types
Products: Forex, CFDs on Equity Indicies, US Dollar Index, Commodities, Crypto, and US Shares
Platforms: [MetaTrader 4, MetaTrader 5, **cTrader**](https://fxgears.com/go/pepperstone/r/platforms) (*cTrader also comes with cAlgo, a C# based algotrading platform for automated trading*)
Notes:
- Islamic account types (swap/interest free) available
- NEW - UK residents have access to tax free [spread betting accounts](http://fxgears.com/go/pepperstone/r/spreadbetting)
- NEW - Currently running an [introductory offer where your first 20 trades are commission free.](https://geni.us/pepperstone20trades) *Not available to UK or European residents*

@@ Line 23: / Line 23: @@
   Note: Margin closeout is set at a 50% initial margin rate. That means if you are required to post $100 of initial margin to control a position, once your account equity drops below $50, the position will be liquidated.
+Australian residents may opt to qualify for '''Professional Trader''' status, where they will lose some client protections (like negative balance protection,) but gain leverage across all assets classes up to 500:1. This is a valid option to Aussie traders who do not wish to take the risk of going offshore and use a foreign broker.
 =="Onshore" Brokers==