menu

Forex Brokers in Australia (ASIC)

Load more

Australia's location in the Oceania region puts it down the pecking order among the forex trading hubs. However, it is one of the best-regulated FX trading jurisdictions and provides a balanced forex trading experience for traders. This piece is about the forex brokers in Australia and their features, which make them an excellent alternative to trading with brokers in the UK or Europe. Forex Brokerage Landscape in Australia.

Australia's investment market has grown from an estimated 650,000 participants in 2010 to more than 1.4 million traders in 2020. The destruction wrecked by the COVID-19 pandemic on the finances of individuals and families created very volatile trading conditions that promoted the growth of the Australian forex trading industry. In 2021, the amount that the average Australian forex trader deposited into trading accounts domiciled with forex brokers in Australia exceeded $8,400. In the same year, the active retail CFD trader base with forex brokers in Australia hit 100,000, following a record uptick in forex trading activity in that zone. A report by Investment Trends indicates that the Australian forex market is seeing the most significant penetration on a per-capita basis.

Despite having only 2.5 million inhabitants, the Australian forex market is attracting traders from outside the territory. This may account for the growing trader participation in this market. In 2017, 61,000 traders performed at least one transaction with a forex broker in Australia. This number grew to 79,000 between 2018 and 2019. As of 2022, that figure now stands at 100,000, all according to data from the Investment Trends report.

The Australian investment market, including the FX and CFD trading market, is regulated by the Australian Securities and Investments Commission (ASIC). ASIC issues the Australian Financial Services License (AFSL), the authorization given to Australian financial services companies to offer retail trading products to the public. The AFSL is one of the most respected regulatory licenses in the forex industry. ASIC issued 339 new AFS licenses out of 565 applications in 2020/2021, indicating the growing popularity of this hub.

How ASIC Regulates Forex Brokers in Australia

The primary duty of ASIC is investor protection. The Australian Securities and Investment Commission believes that an informed investor is less likely to be conned or duped by unscrupulous brokers. That is why in addition to its role of guarding the public against financial fraud, ASIC has resources it deploys to improve the knowledge base of investors.

  • Every company aspiring to become a forex broker in Australia passes several ASIC assessments of competency, qualifications and experience.
  • ASIC has monitoring systems that look at the behaviour of all financial advisors and brokerage staff to ensure they comply with the rules.

ASIC uses two tools to ensure compliance. One of these is the Australian Market Regulation Feed. The other is the Integrated Market Surveillance System, which ASIC uses to monitor all its licensed brokers and market operators. It also looks at the trading activity of customers within the brokerages. ASIC monitors all online trading activity. As a rule, all market operators and AFSL holders must provide ASIC with information regarding all orders, trades, and quotes processed by the trading engines and dealing desks daily. Also, all communication regarding product pricing, the status of orders/transactions and all trading sessions are fed to ASIC for scrutiny.

How Are You Protected as a Client of a Forex Broker in Australia?

Investor protection by ASIC is delivered as follows:

  • Public enlightenment and investor education
  • Enforcement activity against offending brokers
  • Account Segregation
  • Restriction of Leverage

ASIC has a section on investor education on its website and encourages forex brokers in Australia to be as open with their clients as possible regarding retail forex trading. Traders are to be offered only what they want, and signed contracts must be obtained to this effect.

ASIC has a very robust enforcement department. In 2021, it prosecuted 99 individuals and companies for various offences and handed out $63m in fines in H1 2021. Enforcement against errant brokers comes in a spectrum that ranges from fines to outright cancellation of licenses.

Forex brokers in Australia are also expected to segregate the funds belonging to their clients. The National Australian Bank (NAB) is a preferred destination for most of Australia's forex brokers.

The leverage restrictions are perhaps the most excellent tool deployed by ASIC for client protection. Unlike in other jurisdictions, there was a little outcry by the investing public to the move. Several Australian forex brokers created offshore jurisdictions to cater to clients who did not want to operate under the new leverage restrictions. Under the new arrangement, FX majors are to be traded using a maximum leverage of 30:1. Crypto trading comes with a leverage of 2:1. These restrictions initially had an 18-month operation period. Still, a five-year extension to May 2027 has recently come into effect.

ASIC's 6 April 2022 Report 274 release summarises data polled from 60 Australian FX and CFD brokers. In that report, ASIC pointed out the following about the first six months of the leverage restriction regime:

  • 91% reduction in aggregate net losses by retail client accounts (from $372 million to $33 million aggregate net loss per quarter on average).
  • 51% fewer loss-making retail client accounts per quarter on average.
  • 87% decrease in margin close-outs affecting retail client accounts per quarter on average.
  • 88% reduction in negative balance occurrences for retail clients per quarter on average.

ASIC says this points to its success in achieving harm reduction for clients of Australian forex/CFD brokers resulting from its product intervention. This product intervention did not stop at leverage restriction. It also extended to implementing a negative balance protection mandate and prohibitions of bonuses and other forms of inducements.

What Can You Expect to Meet as an Australia FX Trader?

Here are the trade conditions you will encounter as an Australian forex trader.

  1. You will trade in a regulated atmosphere. All forex brokers in Australia are holders of the Australian Financial Services License (AFSL), issued by the Australian Securities and Investment Commission (ASIC). All forex brokers in Australia must display their AFSL information on the home page of their websites.
  2. Leverage caps have been dropped from 1:500 to 1:30 for major currencies.
  3. ASIC prohibits incentive bonuses. Do not expect to receive any.
  4. You will not bear the cost of any investigative process arising from a complaint you file against a broker. The broker will bear the cost, which puts an extra onus of responsibility on them to provide you with good service. Such complaints are now handled by the Australian Financial Complaints Authority (AFCA).
  5. Your trading capital will be part of a segregated pool and will not be touched by the broker for their operations.

Trading Conditions with Forex Brokers in Australia

If you trade with a forex broker in Australia, these are trading conditions under which you will operate:

A) Trading Software

Most forex brokers in Australia combine the MT4 and MT5 trading platforms with other proprietary platforms.

B) Margin Requirements

Margin requirements for FX and CFD products are tighter than before ASIC enforced the new leverage caps. A Standard Lot trade on the AUD/USD is worth $100,000 and will require $3,330 as margin collateral. Minor and exotic currencies, major indices, and gold have a 20:1 leverage cap. Leverage on crypto CFDs is capped at 2:1. Forex brokers in Australia offer professional accounts without the afore-mentioned leverage restrictions. You can opt for a Pro account if you meet the requirements.

C) Commissions & Spreads

Spreads and commissions are as found with other MT4/MT5 brokers. Spreads typically start at 0.5 pips for the AUD/USD.

D) Account Types

There are retail trading accounts and professional accounts for Pro traders. Check the exact conditions with the specific broker.

E) Tradable Assets

Forex brokers in Australia offer various forex pairs and CFDs on stocks, indices, cryptocurrencies and commodities.

F) Value-Added Services

Forex brokers in Australia will usually offer a forex trading education suite. You will also have access to the MQL market and trading plug-ins for the MT4.

Conclusion

This site features a list of forex brokers in Australia, which provide the market conditions allowable under ASIC rules. Your funds will be segregated, and you will be guaranteed negative balance protection and updated margin stop-out rules. As the data from ASIC show, the trading conditions its regulatory mandates have created have reduced the risks to traders, so feel free to trade with a forex broker in Australia today.