ASIC Consultation on CFDs and binary options
22 August 2019
LEI No: 2138003A5Q1M7ANOUD76
IG GROUP HOLDINGS PLC
ASIC Consultation on CFDs and binary options
IG Group Holdings plc ("IG", "the Group", "the Company"), a global leader in online trading, notes that the Australian Securities and Investments Commission (ASIC) has today issued a consultation paper on potential product intervention measures relating to the provision of CFDs and binary options (CP322 - Product intervention: OTC binary options and CFDs).
The Group has previously set out that it expected that product intervention measures would be introduced in Australia, and this consultation paper does not change the Group's previously stated target revenue growth for its core business of around 3-5% per annum over the medium term. The Group's guidance that it expects to return to revenue growth in FY20 also remains unchanged.
The consultation proposals
The package of measures being proposed by ASIC are similar to those that have been introduced by ESMA in the EU and will apply only to retail clients. In summary the measures being consulted on in relation to CFDs are:
· Leverage restrictions of:
o 20:1 for CFDs over currency pairs or gold;
o 15:1 for CFDs over stock market indices;
o 10:1 for CFDs over commodities (excluding gold)
o 5:1 for CFDs over shares or other underlying assets; and
o 2:1 for CFDs over crypto-assets.
· A margin close-out rule which would require positions to be closed out if trading funds fall to below 50% of the initial margin required;
· The introduction of negative balance protection;
· A prohibition on inducements to open or fund a CFD trading account or trade CFDs;
· A requirement to include prominent risk warnings;
· A requirement to provide real time disclosures of total position size;
· A requirement to provide real time disclosures of overnight funding costs; and
· A requirement to maintain and make available pricing methodology and execution policy.
Additionally, ASIC are consulting on a ban on the provision of binary options to retail clients.
The measures being consulted on would apply to retail clients only and would not apply to wholesale clients. Clients can choose to elect to be categorised as a wholesale client if they meet the legal requirements. The requirements are that an individual must have net assets of at least 2.5 million Australian dollars or a gross income for each of the last two financial years of at least 250,000 Australian dollars. Either requirement must be independently verified by a qualified accountant.
The consultation is due to close on 1 October and the Group expects that the final product intervention measures will be implemented by ASIC early in the second half of the Group's current financial year, FY20.
The Group's focus on serving sophisticated and knowledgeable clients means that IG's business is well placed to adapt and thrive in a stricter regulatory environment. In IG's experience, when proportionate regulation has been applied consistently and appropriately, client outcomes have improved, and compliant providers have benefitted over the longer term.
For further information, please contact:
IG Group Investors IG Group Press FTI Consulting
Liz Scorer Ramon Kaur Neil Doyle / Ed Berry
020 7573 0727 020 7573 0060 020 3727 1141 / 1046
Disclaimer -Forward-looking statements
This statement, prepared by IG Group Holdings plc (the "Company"), may contain forward-looking statements about IG Group Holdings plc and its subsidiaries (the "Group"). Forward-looking statements involve uncertainties because they relate to events, and depend on circumstances, that will, or may, occur in the future. If the assumptions on which the Group bases its forward-looking statements change, actual results may differ from those expressed in such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update these forward-looking statements. Nothing in this statement should be construed as a profit forecast.
IG empowers informed, decisive, adventurous people to access opportunities in over 16,000 financial markets. With a strong focus on innovation and technology, the company puts client needs at the heart of everything it does.
IG's vision is provide the world's best trading experience. Established in 1974 as the world's first financial derivatives firm, it continued leading the way by launching the world's first online and iPhone trading services.
IG is an award-winning, multi-platform trading company, the world's No.1 provider of CFDs* and a global leader in forex. It provides leveraged services with the option of limited-risk guarantees and offers an execution-only stock trading service in the UK, Australia, Germany, France, Ireland, Austria and the Netherlands. IG has a range of affordable, fully managed investment portfolios, which provide a comprehensive offering to investors and active traders.
It is a member of the FTSE 250, with offices across Europe, including a Swiss bank, Africa, Asia-Pacific, the Middle East and the US, where it offers on-exchange limited risk derivatives via the Nadex brand.
*Based on revenue excluding FX (from half yearly published financial statements, June 2019)
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