FXCM Hit with 21-Day CFD Ban by ASIC
ASIC has issued an interim stop order against Stratos Trading Pty Ltd, trading as FXCM. It came after finding problems in its target market determination. The regulator concluded that FXCM’s CFDs were being positioned as suitable for investors with a medium risk appetite. But it contradicts the risk profile of these products.
Why ASIC intervened
ASIC stated that CFDs offered by FXCM involve leverage, volatility, liquidity risk and pricing risk. So, the products are unlikely to suit anyone who falls under a ‘medium risk appetite’ category. This concern alone triggered the regulator to review FXCM’s TMD and ultimately issue the stop order.
What the order includes
The interim order prevents FXCM from issuing CFDs to retail clients and from opening new trading accounts for such products. It applies to CFDs referencing several asset classes:
- Currency pairs and Forex baskets
- Treasuries and commodities
- Stock indices
- Stocks and stock baskets
- Cryptocurrencies
Impact on existing clients
Existing retail clients are not blocked from managing their current exposure. They can vary or close positions. But no new CFD positions can be initiated during the order window. The order is valid for 21 days unless ASIC withdraws it earlier.
ASIC’s intent
The regulator’s goal is simple: stop the distribution of high-risk products to consumers whose financial goals, needs or risk appetite do not align with them. Now, FXCM must resolve the deficiencies in its target market determination before these products can be offered again.
About FXCM
FXCM (Forex Capital Markets) is an online foreign exchange broker. It provides retail and institutional clients with forex trading, contract-for-difference (CFD) products and spread betting. FXCM offers trading platforms such as Trading Station for desktop and mobile access. The group also runs FXCM Pro, an institutional prime-brokerage and liquidity service for brokers and hedge funds.
Summing Up
The interim 21-day stop order shows ASIC’s strict stance on investor protection. FXCM must address the TMD issues before resuming CFD distribution to retail clients.
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