Digital-Asset Settlement Would No Longer Avoid the CFD Perimeter
The proposed definition would capture derivatives with the defining characteristics of a CFD when settlement occurs through a digital-asset transfer. ASIC’s concern is that two products can expose a retail client to the same leveraged market risk even if one is closed by a cash payment and the other delivers a token. Different treatment based only on settlement form would create an opening for product engineering around rules designed to address the underlying risk.
This is increasingly relevant as crypto exchanges add instruments linked to shares, commodities and indices. FinanceFeeds has documented how tokenized equity and index perpetuals can provide continuous leveraged exposure without giving the customer a conventional shareholding. ASIC is not proposing to classify every digital asset as a CFD. It is asking whether derivatives with CFD economics should receive equivalent treatment regardless of how value is delivered at settlement.
The distinction will affect product design, disclosure, leverage and distribution. Issuers will need to map the economic features of each instrument rather than rely on labels such as token, perpetual or digital asset. Firms operating several legal entities may also need to reassess whether a product marketed from an offshore platform is being distributed into Australia under arrangements that trigger local obligations.
Opposing Positions Cannot Reduce Initial Margin
ASIC also wants the order to state expressly that initial margin applies separately to each CFD. An issuer could not reduce the requirement simply because a client holds opposing long and short positions. This addresses a practice identified in the regulator’s sector review, where more than half of reviewed issuers had offered margin discounts on offsetting positions.
The economic problem is that two opposing trades can neutralise directional exposure while continuing to generate financing charges and other costs. A customer may appear hedged but cannot profit from the matched position unless one side is closed, at which point the remaining trade again carries market risk. Lower margin can keep the structure open for longer and allow fees to accumulate.
The proposal follows ASIC’s review of 52 licensed CFD issuers, which produced almost A$40 million in refunds for more than 38,000 investors. The regulator also required changes to target markets, onboarding questionnaires, outcome monitoring and transaction reporting. As FinanceFeeds reported on the review’s enforcement consequences, the work has already moved beyond supervisory guidance into licence action.
Options CFDs Face a Separate Availability Question
ASIC is consulting separately on whether retail clients should continue to receive CFDs over options when losses can exceed the premium. The question targets a hybrid risk structure. A conventional option buyer generally knows that the premium is the maximum loss, but a CFD referencing an option can be constructed so that the customer’s exposure is not limited in the same way.
The regulator says 85% of retail clients trading CFDs over options made a net loss in the period covered by its data. That figure is likely to place pressure on issuers to show why access should remain available and what controls can prevent customers from confusing an option’s premium with the maximum loss on the CFD that references it.
ASIC also wants to clarify initial margin for these contracts. Issuers will need to consider whether product disclosures, platform labels and loss illustrations explain the structure sufficiently. A technically accurate product name will not solve the problem if the interface encourages customers to read the contract as a limited-risk option purchase.
A 91% Reduction Does Not Mean the Harm Disappeared
The current order took effect in 2021 and reduced aggregate quarterly net client losses from A$372 million to A$33 million during its first six months, a 91% decline. Margin close-outs fell 87%, while active retail accounts dropped from 504,905 to 357,841. FinanceFeeds covered the evidence when ASIC extended the restrictions to 2027.
Those results support continuation, but the latest figures show that the product remains loss-heavy. ASIC says 68% of retail clients lost money during the 2023 to 2024 financial year. Aggregate losses exceeded A$458 million over 12 months, including A$73 million in fees. The order has reduced the speed and scale of harm without turning CFDs into a product on which most retail traders make money.
The regulator’s approach also contrasts with the expansion of round-the-clock leveraged products. Weekend commodity CFDs add questions about reference prices, spreads and hedging when core markets are closed. Separately, 24/7 gold offerings show how access can expand faster than the underlying liquidity on which fair execution depends.
What CFD Issuers Need to Decide Before the Deadline
Responses are due by 5pm Australian Eastern Daylight Time on 9 November. Issuers need to assess which products could enter the revised definition, whether their margin engines net opposing positions, how discounts and research tools are offered, and what changes would be required for options-linked CFDs. Consumer groups are likely to focus on whether digital-asset settlement and promotional tools have opened practical gaps in the existing regime.
The consultation does not immediately change the rules. The existing order remains due to expire in May 2027, and the proposed extension requires ministerial approval. Yet the direction is clear: ASIC wants the restrictions to remain a durable part of Australia’s retail derivatives market, not an emergency measure that ends once the original term runs out.
For brokers, the central message is that product innovation will be assessed by outcome and risk. Changing the settlement rail, adding a token or packaging exposure as a new digital instrument will not necessarily move it outside the CFD framework. If the economics remain leveraged, bilateral and difference-based, ASIC is preparing to regulate them on that basis.