Below you will find a list of Forex Brokers regulated by the Australian Securities and Investment Commission (ASIC). The above-mentioned regulatory authority ensures that brokers conduct their business fairly and hold responsibility for safety of client’s funds. Compared to different regulators in other countries, the ASIC have very strict requirements for a broker company to get licensed and closely monitor its business activity, but at the same time there are no complicated restriction on Forex trading itself, like in EU or US for instance. There’s no prohibition of hedging, no significant leverage limitations and no FIFO rule apply.
ASIC forex brokers are brokers that operate in the Australian forex market and which are licensed and authorized as financial service providers (FSPs) by the Australian Securities and Investment Commission (ASIC). The regulation of ASIC forex brokers is covered by the Corporate Plan of 2018-2022, which details what the Australian regulator expects its licensed entities to comply with.
ASIC’s procedures for licensing brokers are quite strict, and prior to 2019, the regulator had not issued any new brokerage licenses in 2 years. That goes to show that companies which have the Australian Financial Services License (AFSL) have met the strict requirements set out for them by the Australian regulator and can be considered safe for retail forex trading.
The mandate for ASIC-regulated brokers centers predominantly on risk management for firms and their clients as well as consumer protection via independent trader education.
A) Risk Management
Following the market upheaval that occurred in January 2015 when the Swiss National Bank ended the Swiss peg to the Euro, ASIC immediately swung into action and asked all its regulated brokers to revise all risk management protocols that had been put in place for their firms and their clients. This call was made in response to the collapse of two brokerages as well as the calamitous losses suffered by many brokers across the world in the wake of the SNB’s decision. It was also rooted in the experience of some ASIC-regulated brokers that survived the market holocaust, having independently instituted their own in-house risk management mechanisms. These mechanisms have now been adopted wholesale and every ASIC-regulated brokerage should be able to deal with such market-moving events if they should occur in the future.
Part of the risk management protocols that ASIC-regulated brokers have to comply with include:
The bulk of the clientele of ASIC regulated brokers comes from the Asian Pacific region, which unfortunately has jurisdiction where forex companies are not regulated. This has led to many scam brokerages putting out marketing campaigns to target local clients; something that ASIC wants to put an end to.
B) Bonus Ban
Then there is the issue of bonuses issued by brokers to incentivize trading. When bonuses were first introduced on European forex platforms, they were first used as a way of attracting new traders to the various forex platforms. But as is usually the case with products that are introduced without oversight, the end game soon changed from using bonuses as a marketing tool, to becoming a tool for incentivizing volume trading. This came with a lot of abuse and ASIC was one of the first regulators to outlaw them completely. So if you are a trader on an ASIC-regulated platform, you are not going to see any bonuses being offered either for account opening or for volume trading.
C) Consumer Enlightenment
ASIC also strives to ensure that consumers of forex products are enlightened and can understand to some extent, the products that they are trading. This enlightenment drive is being achieved via an online portal known as MONEYSMART. What ASIC strives to achieve with MONEYSMART platform is to deliver trader education from an independent standpoint, thereby reducing any element of bias or downplay of the risk element to trading as is sometimes the case when such education is provided by brokers.
Information about the latest scams, or about unlicensed brokers targeting the local trading community are also put out by ASIC.
ASIC has so far not succumbed to pressures to conform to the sweeping changes being made by Tier A – B licensing jurisdictions for retail forex in terms reducing the leverage caps and applying other restrictive measures on what assets can be traded. However, ASIC continues to maintain bilateral communication with foreign regulators to ensure that scam brokerages do not use the Australian market as their safe haven. In this regard, ASIC has entered into an agreement with the Japanese Financial Services Authority (JFSA) to prevent bilateral marketing of forex products between companies located in both countries.
What can traders expect when trading with ASIC-regulated brokers?
A) High Leverage
Perhaps the most obvious element that traders will notice is the fact that ASIC-regulated brokers still offer a high leverage cap of 1:500. Traders who cannot afford the margin requirements that have been set out by ESMA in Europe and the United Kingdom, and who still want the benefit of trading high leverage under conditions of very strong regulation, will find ASIC-regulated brokers to be a very good alternative. Indeed, some traders who cannot fulfill the margin requirements of the ESMA ruling will find that their EU brokers with a presence in Australia will consider moving these accounts to their Australian platforms.
B) New Dispute Resolution Mechanism
A new dispute resolution agency, directly supervised by ASIC, has been established. The Australian Financial Complaints Authority (AFCA) has emerged as the new body that will handle any complaints that traders may have about their brokers in Australia. In addition, these complaints will incur a cost to the broker and not to you, the trader. This places an added burden of responsibility on the ASIC-regulated brokers to ensure that they provide you with nothing but the best, and to ensure speedy in-house resolutions of any complaints before things get out of hand.
C) Account Segregation
Your funds are segregated and placed with the strongest banks in the country. The National Bank of Australia seems to be a popular destination. So you can be sure that your funds will not be used by the brokerage to fund their operations or to maintain the margin on their losing in-house trades (as was the sad case in now-defunct MF Global).
D) No Phony Incentive Bonuses
No bonuses will be provided to you in any form. The reasons for this have already been explained.
E) Trader Insurance
The National Guarantee Fund is one of several funds that are available to provide trader insurance and compensation or traders on ASIC-regulated platforms. These funds are used to provide compensation to investors who have been proven to have been shortchanged by their brokers, after investigation by ASIC. This trader insurance package goes hand in hand with the dispute resolution process that is now being managed by an independent agency that is overseen by ASIC.
E) ECN Trading Conditions
Many ASIC-regulated brokers now offer ECN trading conditions, complete with the chance to trade with a FIX API. Using a FIX API removes forex trading from the retail forex platforms, and instead connects the trader directly to a liquidity provider. This has the advantages of providing faster speeds, direct access to institutional liquidity and ensuring confidentiality of your trading strategies.