ASIC is an independent government and regulatory body that aims to protect Australian consumers and investors and is responsible for implementing and enforcing the law, processing, storing, and managing information efficiently, as well as not only maintaining and improving the performance of the Australian financial system but also publishing relevant data and information on companies and entities.
Advantages and Disadvantages of Trading in ASIC Regulated Brokers
Despite having basic requirements equivalent to the UK and US, ASIC regulated brokers are more flexible in managing their trading conditions. Unlike FCA which limits maximum leverage to only 1:30, ASIC regulated brokers can provide leverage up to 1: 100 or above. Also, ASIC-regulated forex brokers allow hedging strategies without First-In-First-Out regulations. Many ASIC regulated brokers also offer trading on ECN accounts, with the application of the FIX API. The trading technology allows traders to experience faster and transparent transactions.
It should be noted, since 2019, ASIC has issued a regulation that its brokers can only accept domestic clients and compensation funds apply to traders within Australia. This becomes both a deficiency and an excess. Since most ASIC regulated brokerage clients come from the Asia Pacific region, it is not surprising that these brokers have alternative regulations other than ASIC. That way, traders can get services from companies whose work systems have been recognized by ASIC, but still under the trading conditions required by these alternative regulations.
FAQ
What does ASIC regulated mean?
Being regulated by ASIC means operating under the standards of Australian financial regulator. Brokers licensed and recognized as Financial Service Providers (FSPs) in Australia must be registered with ASIC and comply with the Corporate Plan of 2018-2022.
What are the ASIC rules?
In general, ASIC rules are strictly applied to cover risk limitation, bonus prohibition, and consumer enlightenment. The risk management protocol at ASIC regulated brokers includes:
A minimum operational fund of 1 Million USD,
a segregated account at a tier 1 bank, and
a physical office that can be visited in Australia.
Bonuses are also not allowed due to the risks of misusing them to attract new clients without a clear terms and conditions.
ASIC-regulated forex brokers allow hedging strategies without First-In-First-Out regulations. Most of them offer trading on ECN accounts with the application of the FIX API. But it should also be noted that as of 2019, ASIC has issued a regulation that brokers under its regulation can only accept domestic clients. In this case, the compensation funds would only apply to traders within Australia.
What is the main purpose of ASIC?
Just like other forex regulators in general, ASIC's basic task is to oversee forex brokers carry out their company's activities fairly and pay attention to the safety of client funds.
If you are interested to open an account in one of the brokers in the list above, make sure to try the forex demo account before proceeding to register in the live account.
