Six leading CFD brokers in Australia have joined in an initiative to produce a set of industry standards as they attempt to win back the trust of traders and investors hit by the demise of MF Global.
CFD providers have been discussing the standards for over 9 months and aim to project the CFD industry as a well-governed business. CMC Markets head of Australia and New Zealand Louis Cooper noted ‘There’s an element of the industry that has given the more well governed and credible businesses a bad name’.
The six CFD companies – Capital CFDs, City Index, CMC Markets, GFT Forex, IG Markets and Saxo Capital Markets – have agreed to form the Australian CFD Forum. The founding members of the forum constitute about 90% of CFD accounts across Australia, however forum membership will be open to any CFD company that agrees to implement a set of 16 industry standards targeted at protecting clients by making sure they understand the risks, as well as the potential returns, involved with CFDs.
The standards aim to exceed ASIC’s obligations which were laid down last year before the demise of derivatives broker MF Global, after it was reported that the American company mixed client monies with its own to fund a multi-billion bet on sovereign European bonds that went sour.
ASIC chairman Greg Medcraft welcomed the news, noting that industry groups generally perform an important role in helping maintain investor confidence. He commented ‘We look forward to engaging with the Australian CFD Forum and learning more about their best practice standards.’
The forum’s best practice obliges providers to hold all client monies separately from their own. Louis Cooper of CMC Markets noted that segregation of client funds is a main issue and this will be a basic minimum industry requirement for any CFD company looking to join the group. Other key issues discuss disclosure and consumer education which are also included in forum’s basic code of standards.
One issue that the board weren’t able to reach an agreement on revolves around the use of credit cards to fund an account. Some members believe that the ability of prospective clients to open and fund an account with a credit card isn’t a sensible choice, but others argued that clients strongly favoured the flexibility of being able to fund their account in that way.
