ASIC Corporations (Product Intervention Order—Contracts for Difference) Instrument 2020/986 (Cth)

ASIC Corporations (Product Intervention Order—Contracts for Difference) Instrument 2020/986 I, Oliver Harvey, delegate of the Australian Securities and Investments Commission, being satisfied that CFDs (as defined in the following legislative instrument) are a class of financial products that: (a) is available for acquisition by issue to persons as retail clients; and (b) has resulted in and is likely to result in significant detriment to retail clients; make the following legislative instrument.

Date 22 October 2020

Oliver Harvey

Contents

Part 1—Preliminary 1 Name of legislative instrument 2 Commencement 3 Authority 4 Interpretation Part 2—Order 5 Conditional prohibition on dealing in CFDs in relation to retail clients 6 Prohibition on providing inducements to retail clients in relation to CFDs 7 Conditions applying to dealings in CFDs in relation to retail clients 8 CFD issuers to notify retail clients of the product intervention order

Part 1—Preliminary

1 Name of legislative instrument This is the ASIC Corporations (Product Intervention Order—Contracts for Difference) Instrument 2020/986.

2 Commencement This instrument commences on the later of: (a) 23 November 2020; and (b) the day after it is registered on the Federal Register of Legislation. Note: The register may be accessed at www.legislation.gov.au.

3 Authority This instrument is made under subsection 1023D(3) of the Corporations Act 2001.

4 Interpretation (1) In this instrument: Act means the Corporations Act 2001. CFD means a derivative that: (a) is a contract for difference; and (b) is provided by a person (CFD issuer) who carries on a business of issuing contracts for difference to other persons (holders). CFD issuer: see the definition of CFD. CFD trading account means a trading account that a holder has with a CFD issuer, through which the holder can place orders to acquire and dispose of CFDs. client money account means, in relation to CFD issuer, an account maintained by the CFD issuer for the purposes of section 981B of the Act. contract for difference means a derivative to which the following apply: (a) the value of the derivative, or the amount of consideration to be provided under the derivative, is ultimately determined, derived from or varies by reference to (wholly or in part) the change, between the acquisition and termination of the derivative, in the amount or value of an underlying specified under the terms of the derivative; Note 1: For example, a derivative under which, at termination, the amount of consideration payable depends (wholly or in part) on the change in the level of a stock market index over the term of the derivative. Note 2: There may be other factors that affect the value of the derivative. For example, fees and costs. (b) the derivative is not able to be traded on a licensed market; (c) the derivative: (i) does not terminate on a fixed date; or (ii) if the derivative terminates on a fixed date—it is a derivative of a kind that are typically terminated before the fixed date; Note 1: For example, the derivative may have a fixed termination date if the underlying has a fixed termination date. Note 2: This means that options, futures, swaps and forward rate agreements will generally not be contracts for difference. (d) the holder has the right to terminate the derivative; Note: The terms of the derivative may provide for its termination in other circumstances. For example, on the occurrence of an event of default or on the issuer (other than the holder) exercising a right to terminate the derivative. (e) on termination, the obligations of the parties are settled in cash or by set‑off between the parties. Note: derivative is defined in section 761D of the Act. cryptoasset includes cryptocurrency. exchange rate for a major currency pair means an exchange rate for a pair of currencies that consists of any two of the following: (a) Australian dollar; (b) British pound; (c) Canadian dollar; (d) euro; (e) Japanese yen; (f) Swiss franc; (g) US dollar. exchange rate for a minor currency pair means an exchange rate for a pair of currencies that is not an exchange rate for a major currency pair. holder: see the definition of CFD. initial margin means the margin which a CFD issuer requires to be provided by a holder in relation to the issue, or proposed issue, of a CFD to the holder. major stock market index means any of the following stock market indices: (a) CAC 40; (b) DAX; (c) Dow Jones Industrial Average; (d) EURO STOXX 50 Index; (e) FTSE 100; (f) NASDAQ-100 Index; (g) NASDAQ Composite Index; (h) Nikkei Stock Average; (i) S&P 500; (j) S&P/ASX 200. minor stock market index means a stock market index that is not a major stock market index. net equity, in relation to a CFD trading account of a retail client, means the sum of: (a) derivative retail client money held both: (i) in a client money account for the benefit of the retail client; and (ii) in relation to the CFD trading account; and (b) any other money: (i) held both: (A) in the client money account for the benefit of the retail client; and (B) in relation to the CFD trading account; and (ii) that was paid into the client money account by the CFD issuer in relation to a dealing in a CFD by the retail client; and (c) the value of derivative retail client property held for the benefit of the retail client and in relation to the CFD trading account; and (d) to the extent not referred to in (a) or (b)—the unrealised profits (if any) of the retail client less the unrealised losses (if any) of the retail client for all of the retail client's open CFDs that are connected to the CFD trading account. Note: The amount referred to in paragraph (d) and the amount of net equity may be negative. open in relation to a CFD means a CFD that has not been terminated. terminate, in relation to a derivative, includes the derivative being closed out. underlying, in relation to a derivative, means any thing (of any nature whatsoever and whether or not deliverable) other than the derivative, including, for example, one or more of the following: (a) an asset; (b) a rate (including an interest rate or exchange rate); (c) an index; (d) a commodity. Note: Unless a contrary intention appears, a term that is defined in section 761A of the Act has the same meaning in this instrument: see sections 761A and 761H of the Act. (2) For the purposes of this instrument, a reference to offering to issue a CFD includes a reference to inviting an application for the issue of the CFD.