Last month, Capital CFDs entered the Australia’s contracts-for-difference (CFD) marketplace despite ASIC tightening its regulations. The Australian CFD industry is thought to be the second largest in the world but was hit with the global recession many investors were hit hard due to their highly leveraged trades.
Yet there is a viable market out there based on market statistics. In its latest industry report, Investment Trends, a research company noted that Australia’s CFD market was valued at about $350 million with the number of investors increasing from 32,000 in 2009, up 22% to 39,000 this year.
Andy Merry, managing director of Capital CFDs, noted that Australian private investors are now returning to trading contracts for difference, with Capital concentrated on providing a responsible product.
Launched in November, a Capital CFDs spokesman stated that Capital CFDs seeks to differentiate itself from other providers by including mandatory stop-losses on all open positions, fully segregated client accounts, unlimited simulator accounts, customer suitability screening and clear and comprehensive risk warnings.
Matching the rise of interest in contracts for differences was ASIC’s shift to increasing regulation for CFDs so as to prevent investors from biting off more than they can chew.
On November 17 ASIC issued a Consultation Paper where it drafted a regulatory guide which provided details of how CFD companies should provide product disclosure statement and ongoing disclosures demanding them to address benchmarks on an ‘if not, why not’ basis.
Merry stated that Capital CFDs back ASIC’s moves to close loopholes on regulations on the Australian market.
‘I think CFD trading is here to stay in Australia, ASIC are regulating as much as they can, I do think it’s a very competitive market over here,’
‘Where there is prosperity, people with more disposable income are going to have a chance to invest and speculate, that’s the benchmark for the product doing well,’ said Merry.
Capital CFDs is the Australian division of London Capital Group. Other CFD brokers with a presence in Australia inlude CMC Markets, IG Markets, MF Global and GFT.