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ASIC: 80% of Binary Options traders and 72% of CFD traders loose money

Jun 29 2018
By
Jonathan Smith

The Australian Securities and Investments Commission says  80% of Binary Options traders lose money, while the percent with CFD and forex traders is 72 and 63 respectively.

 
The findings are published in June in a paper titled “Improving Practices in the Retail OTC Derivatives Sector” and come as a warning to all forex, CFD and Binary options brokers in the country.
 
“The integrity of the retail OTC derivatives sector is a key focus for ASIC. ASIC expects licensed issuers to conduct themselves appropriately and ensure consumers trade in retail OTC derivatives with a clear understanding of the products and the risks to which they’re exposed”, ASIC Commissioner Cathie Armour said, cited by LeapRate.com.
 
The retail OTC derivatives sector in Australia is an active and growing market, with an annual turnover of 11 trillion USD and over 450,000 investors.
 
A recent ASIC review of 57 of forex, CFD and binary options brokers identified a number of risks associated with the financial instruments offered to retail investors.
 
ASIC points out that actual client profits are inconsistent with marketing materials; risk management practices for client money are outdated; some referral arrangements may be in breach of selling prohibitions and last but not least that some brokers are providing wholesale services or allowing third parties to ‘white label’ their products without operational capital to supervise counterparties and support their exposures.
 
ASIC does not specify as to whether it will actually do anything apart from issuing the warning, but did say it will examine the problems further as part of its efforts to reform the sector. 
 
Meanwhile, earlier this year the pan European regulator ESMA introduced new rules covering all forex and CFD brokers, which will come in to effect this summer.
 
The new rules cap the maximum leverage allowed for forex trade at 1:30, require all brokers to follow a Negative Balance Protection policy, impose a total ban on Binary Options and also ban all deposit bonuses.
 
ASIC admits that Binary options may be the least transparent in terms of underlying pricing, strike prices and payout structures. 
TAGS: ASIC  Binary Options  CFD  Forex  ESMA 
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