ASIC Wants the CFD Capital Floor Frozen Until 2032

ASIC proposed on Tuesday to extend the capital rules for Australian issuers of retail over-the-counter derivatives by five years, with no changes to the existing requirements. Instrument 2022/705, which sets the financial resources test for all Australian financial services license holders issuing OTC derivatives to retail clients, is currently set to self-repeal on 1 October 2027. The proposal would move that date to 1 October 2032. The regulator stated it assessed all eight instruments in the consultation as operating effectively, describing them as “a necessary and useful part of the legislative framework.”

The test requires net tangible assets of at least AU$1 million (approximately $704,000) or 10% of average revenue, whichever is greater. Half must be held in cash or cash equivalents, and half in liquid assets. For issuers with average revenue above roughly AU$10 million, the percentage-based requirement applies and the floor is redundant. Below that threshold, the AU$1 million figure has remained unchanged since 31 January 2014. ASIC originally set the floor in Class Order 12/752, phasing in AU$500,000 or 5% of average revenue from 31 January 2013, and AU$1 million or 10% a year later. The regulator remade the class order in September 2022 without significant changes, drawing only one submission.

Notably, on 30 July ASIC announced it would raise net tangible assets thresholds for responsible entities, investor directed portfolio service operators and corporate directors of retail CCIVs to reflect inflation, with annual indexing starting 1 July 2027. Those thresholds had last been updated in June 2013. The retail derivatives figures date from the following year, and the current consultation proposes no equivalent indexation. ASIC noted that indexation of the derivatives thresholds would require a separate consultation, as the combined process used for instruments deemed extendable without further changes does not apply.

Separately, ASIC’s product intervention order for retail CFDs, which caps leverage and mandates negative balance protection, runs to 23 May 2027—four months before the capital instrument’s current expiry. No extension proposal for that order has been made yet. The consultation also covers seven other instruments, including employee share schemes, superannuation disclosure, financial services guides, and insurance claims handling. Only one trading-related instrument is included: a class waiver exempting futures market participants from aggregate loss limit rules that the ASX 24 platform cannot support, set to run to 1 October 2028.

Enforcement against the sector has intensified. ASIC removed or restricted 87 firms and individuals from financial services in 2025-26, up from 58 a year earlier. CFD cases accounted for approximately 37% of the record AU$830 million in court-ordered civil penalties secured by ASIC over the same 12 months. Feedback on the extension proposal is due by 5pm AEST on 8 September. Finance Magnates reported in 2012 that the regime replaced by the AU$1 million floor allowed an issuer to operate on just AU$50,000. If extended to 2032, the AU$1 million figure will have stood unchanged for more than 18 years.