ASIC Proposes 10-Year Extension and Amendments to CFD Product Intervention Order

Key Takeaways

• ASIC is consulting on a proposal to extend the CFD Product Intervention Order (PIO) for a further 10 years and introduce targeted amendments addressing margin calculation, inducements, record-keeping, and digital asset settlement.
• CFD issuers and brokers should review the proposed changes closely, as they tighten margin requirements for CFDs over options and multi-position netting, and expand the PIO's scope to capture digital-asset-settled derivatives with CFD-like characteristics.
• Feedback is due by 9 November 2026, giving firms a limited window to assess operational and compliance impacts.

Deep Dive

ASIC's consultation on CS 64 proposes to extend the CFD PIO (Instrument 2020/986) for a further 10 years beyond its current May 2027 expiry, reflecting ASIC's assessment that the order continues to reduce retail client harm but that losses remain substantial—68% of retail CFD clients incurred net losses in FY2023–24, totaling over AUD $458 Million, including AUD $73 Million in fees. For compliance teams at CFD issuers, this signals continued regulatory scrutiny of leveraged retail trading products and confirms that core protections (leverage limits, standardized close-out arrangements, negative balance protection, and inducement restrictions) will remain embedded in the regulatory framework for the foreseeable future.

The proposed amendments introduce several substantive changes compliance teams must prepare for. First, margin requirements for CFDs over options would be clarified: where client losses are capped at the premium, margin equals the premium; where losses can exceed the premium, margin must reflect the underlying asset's margin rate. Second, ASIC proposes to explicitly prohibit netting of long and short CFD positions when calculating initial margin—a practice ASIC's 2024–25 sector review found was being misapplied, leading to AUD $36 Million in client refunds from 28 issuers. Third, new record-keeping obligations (seven-year retention) would apply to permitted discount offers, with stricter conditions on how discounts and educational/research tools can be structured to avoid being deemed prohibited inducements. Finally, ASIC proposes modernizing the CFD definition to capture derivatives settled via digital asset transfer, not just cash or set-off, closing a potential regulatory arbitrage gap, alongside updating terminology from "cryptoasset" to "digital asset."

Separately, ASIC is gathering evidence on whether CFDs over options that expose clients to losses beyond the premium should be restricted or banned outright for retail clients—a signal that further, more restrictive rulemaking could follow this consultation.

Compliance professionals at CFD issuers, brokers, and digital asset derivative providers should: (1) review current margin calculation methodologies, particularly for options-based CFDs and multi-position netting practices; (2) audit discount and inducement programs against the proposed permitted discount criteria and prepare record-keeping systems; (3) assess whether any digital-asset-settled products could fall within the expanded CFD definition; and (4) submit feedback to ASIC by 5pm AEDT on 9 November 2026, particularly on transitional period needs and compliance cost impacts. Given the retrospective refund action already taken against margin-netting issuers, firms should treat the clarified netting prohibition as a high-priority area for immediate internal review, regardless of the consultation outcome.

Source: Australian Securities and Investments Commission