The Australian Securities and Investments Commission (ASIC) on Oct. 12 proposed extending retail leverage restrictions to crypto-settled derivatives, closing a loophole that currently allows some contracts to escape the regulator's product intervention order. The move comes as ASIC seeks a further 10-year extension of its CFD restrictions, arguing that the current framework has materially reduced harm but needs updating for products that settle through digital asset transfers.
Why digitally settled derivatives fall through the cracks
Under ASIC's existing rules, CFDs are generally covered when settled in cash or through offsetting obligations. But some derivatives with similar characteristics can settle through transfers of digital assets, potentially placing them outside the current product intervention order. ASIC wants to extend the definition to qualifying digitally settled contracts, regardless of whether their underlying exposure is linked to cryptocurrencies, traditional assets, interest rates, or market indices. For CFDs referencing cryptocurrencies, the current maximum retail leverage is 2:1. Other contracts face limits ranging from 5:1 for shares to 30:1 for major currency pairs. The proposed expansion would depend on a derivative's underlying exposure and contractual structure, rather than automatically imposing the cryptocurrency leverage cap on every product settled using digital assets. Some fixed-expiry crypto futures and options would remain outside the framework.
The numbers behind the crackdown
ASIC's push follows a review showing that 68% of retail CFD clients lost money during the 2023–24 financial year, with combined losses exceeding A$458 million ($325 million), including A$73 million in fees. That figure covers CFD trading across all asset classes, not cryptocurrency derivatives alone. The regulator also found that 85% of retail clients trading CFDs over options lost money during the same period, prompting proposals to clarify margin requirements and examine whether some products should remain available to ordinary investors. ASIC is seeking evidence on contracts that could expose traders to losses exceeding the options premium, including structures with potentially unlimited downside exposure. It has yet to decide whether those products should face further restrictions or an outright prohibition.
Margin netting and promotional discounts in the crosshairs
The latest proposal would tighten how brokers calculate initial margin, requiring them to calculate minimum margin separately for each CFD, preventing margin netting. That practice, where firms offset margin requirements across positions, has already drawn regulatory action: ASIC's intervention over margin-netting practices led 28 issuers to refund more than A$36 million to affected retail customers. On the promotional side, ASIC wants tighter conditions for discounts, requiring permitted offers to be available on substantially equal terms to retail customers and prominently displayed on brokers' websites and trading platforms. Firms would need to retain records of qualifying discounts for seven years after the offers end, while ensuring educational and research tools are not used to encourage prohibited trading activity.
What ASIC says it has achieved so far
ASIC Commissioner Alan Kirkland said existing restrictions had materially reduced investor harm, particularly by limiting excessive leverage. During the first six months after the protections took effect in March 2021, aggregate quarterly retail losses declined 91%, from A$372 million to A$33 million, and quarterly margin close-outs fell 87%. The existing CFD intervention order expires on May 23, 2027. ASIC argues that a further 10-year extension would give firms greater regulatory certainty while preserving the regulator's ability to revoke the restrictions earlier.
What happens next
The amendments remain under consultation, and industry feedback could change their final scope. ASIC has not set a firm deadline for the consultation's conclusion, but the clock is ticking: the current order lapses in May 2027, and any extension must be finalized before then. For now, the regulator is still gathering evidence on whether certain high-risk options products should remain on the table for retail investors at all. That decision, like the rest of the package, is still pending.
