The Australian Securities and Investments Commission (ASIC) opened a public consultation this Monday (12) to expand protection for investors in contracts for difference (CFDs). The proposal includes derivatives settled in digital assets that have characteristics of these contracts and provides for the extension of current rules for ten years.
The change seeks to correct a regulatory gap. Currently, derivatives with characteristics equivalent to those of CFDs may fall outside the restrictions when settlement occurs through the transfer of cryptocurrencies instead of cash.
CFDs allow speculation on price movements without owning the underlying asset. In Australia, they are subject to leverage limits, negative balance protection and restrictions on commercial incentives for retail investors.
Proposal keeps exceptions for certain futures and options
The expansion does not cover all cryptocurrency transactions. To enter the regime, the derivative must meet specific characteristics, such as having its value linked to changes in an asset or index and allowing the holder to close it.
Certain cryptocurrency futures and options with fixed expiration will remain excluded from this regulation, even when settled in digital assets. Contracts linked to other assets may also be covered if they meet the proposed criteria.
ASIC justifies the review by investor losses. In the 2023 to 2024 fiscal year, 68% of clients who traded CFDs had net losses, greater than A$ 458 million, including A$ 73 million in fees. The data covers all CFDs, not only those associated with cryptocurrencies.
The regulator also proposes clarifying that initial margin must be calculated separately for each contract, without offsetting long and short positions. In a previous review, ASIC led 28 issuers to return more than A$ 36 million to investors affected by margin offsetting practices.
The current rules, in force since March 2021, expire on May 23, 2027. The proposal provides for their extension until 2037, subject to ministerial approval.
The CS 64 consultation accepts contributions until November 9, 2026, at 5 p.m. AEDT. None of the changes has been approved to date.
