How Are Forex Brokers in Australia Regulated by ASIC?
The Australian Securities & Investments Commission (ASIC) is one of the oldest regulators for Forex trading in Australia. It was founded in 1998 replacing the former regulatory body the Australian Securities Commission (ASC).
It serves as a regulator for more than just Forex trading brokers in Australia, it is also concerned with the activities of insurance companies, fund management, credit organizations, hedge funds, corporate governance, investment firms, securities and derivatives, and consumer protection.
During its years of activity, ASIC was concerned with the wellbeing of the brokers, as well as for Forex traders in Australia, pushing for more transparency and reliable financial services for Australian traders.
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The creation of ASIC paved the way for one of the most stable and reliable regulatory systems in the world of Forex trading. The ASIC license is highly regarded in terms of transparency and strict regulations that fight financial scams and fraud.
Despite the trembling reception by governmental and private institutions the ACIS had in its beginnings, it managed to evolve to become the main regulator for different industries in Australia.
The Foundation Of The ASIC
Starting initially as ASC, the Australian Securities Commission, aimed at uniting all the corporate regulators into a single body. Today, ASIC oversees the regulations in all Australia’s corporations.
The former ASC was concerned with the management of the financial services industry, and the regulations of the financial brokers and investment firms. This was established as clear ground for the operations.
The regulatory organization was later reformed to ASIC (Australian Securities and Investments Commission) and it took into account the protection of the traders. ASIC also started to set clear rules that protect the trader’s rights as well as create a safe environment for them.
Yes into its evolution, the ASIC regulatory body became more inclusive and regarded other financial and corporate institutions in the country, by setting the rules and regulations and overseeing the implementation of these rules.
ASIC has faced criticism from governmental bodies and private institutions for not providing a framework that protects the rights of the traders. Many said that it was ineffective in fighting financial crimes and Forex scams.
The criticism has pushed Australia’s regulatory authority to improve its regulations and it has incorporated a consumer-oriented approach, declaring clear-cut rules to ensure a safe ground for the traders.
Huge reforms were carried out to fight fraud and money laundering in Australia, which lifted up the country reputation in terms of financial markets services around the world, these reforms include:
Minimum Operating Capital
All the ASIC Forex brokers are required to have an operating capital of at least AUD 1 million in order to operate in the Forex market, this minimum was increased from the previous AUD 50,000.
This is a guarantee for the traders that a broker has considerable financial support that can absorb any unexpected market fluctuations, without going to default quickly.
Mandating ASIC license
Every Forex broker that wishes to attract investors and traders from Australia, is required to have an ASIC license. Only ASIC regulated brokers can offer services to Australian citizens, whether the broker is located domestically or offshore.
Every FX broker that holds the ASIC license and offers services to Australian citizens, shall have a representative office in Australia. This increases the level of trust among traders and contributes to the idea of having a point of contact in case of any complaint.
Reporting to ASIC
ASIC financial regulator requires all the brokers working under its license to provide periodic reports about the financial activities and summaries. This promotes the transparent framework of the regulations introduced by the ASIC.
These reports are to be audited very thoroughly, and any violation or breach will result in a penalty or suspension of the business license of the broker.
ASIC Regulations vs International Regulations
The reforms done in the Australian economy managed to elevate the country’s financial and economic environment to a higher level
Nowadays, Australia’s financial regulator is ranked among the top financial regulators, and it can be fairly compared to its peers from the UK (FCA license) and the US licenses (NFA, CFTC)
ASIC has introduced new restrictions on the use of maximum leverage, and it has limited the use of uncapped leverage.
The new ASIC maximum leverage rule for retail traders is between 30:1 and 2:1, which is similar to the leverage cap implied by the FCA license.
ASIC Australia does not impose restrictive rules on trading tools, such as FIFO or hedge funding, which are not allowed under the US regulations NFA and CFTC, and many traders avoid trading in the US because of these contradicting rules.
Customer Service Approach
ASIC pays much attention to customer satisfaction, by that, ASIC brokers are expected to deliver very responsive traders’ support communication channels and to resolve every complaint in a respective and timely manner.
Such introduction has made ASIC financial brokers rank on top of the FX broker in terms of customer satisfaction, and responsiveness to clients’ complaints.
Forex Trading Platform
All ASIC FX brokers are ought to incorporate the best trading platform that can be used by every trader, in order to promote trust among traders from Australia and conduct trading in a quick manner, with minimum to no latency and downtimes.
The Rising Popularity Of ASIC
The Australian Securities and Investments Commission has managed to reserve its place among the top licenses that certify the reliability of a financial broker. The relaxed rules paired with the strict control practiced over the ASIC regulated brokers have attracted global attention.
More and more financial brokers started to want the ASIC license since it offers a great guarantee that the broker is legit. As a result, traders have started to confidently trust this license.
ASIC security level is considered a great medium, it is not very strict like the NFA and CFTC of the US, at the same time it is not characterized by low requirements such as the IFSC which is considered by many, a low-status license.