ASIC’s proposed CFD product intervention order changes: What CFD issuers need to know

ASIC is seeking feedback on its proposal to extend and amend the consumer protection measures governing contracts for difference (CFDs) in the CFD product intervention order (CFD PIO). ASIC’s proposal is for the CFD PIO to remain in place for a further 10 years. However, industry only has four weeks to respond with the deadline of 9 November 2026.

While the proposal does not fundamentally alter the existing CFD framework, it introduces a number of targeted amendments aimed at addressing industry practices and product developments identified since the CFD PIO commenced in 2021. ASIC has stated that most of the proposed amendments are intended to clarify or refine the existing framework rather than introduce new consumer protection measures.

The proposed amendments are largely directed at issues identified through ASIC’s supervision of the sector rather than representing a broader redesign of the regime.

Who does this affect?

This will impact the entire CFD industry with the existing CFD PIO being, fundamentally, kept in place. However, there are three groups of issuers who need to consider this in more detail. These are issuers who:

• offer CFDs over options
• use digital assets either as an underlying market or to settle CFDs
• offer discounts or other inducements.

CFD over options

One of the most significant proposed amendments concerns CFDs whose value is derived from an option.

ASIC’s 2024-25 sector review found that issuers currently apply different approaches to margining these products and that retail client outcomes are materially worse than for CFDs generally. ASIC reports that 85% of retail clients trading CFDs over options made a net loss.

The proposed amendments introduce a specific methodology for calculating margin requirements for CFDs over options. Broadly:

• where the client’s maximum loss is limited to the premium paid, the minimum initial margin would be the premium; and
• where the client’s loss exposure is not limited to the premium, the margin requirement would be determined by reference to the underlying asset, index or reference value on which the option is based.

Importantly, ASIC has specifically sought submissions on whether CFDs over options that expose retail clients to losses greater than the premium should continue to be available at all. ASIC has not formed a view on that issue, but the consultation signals that further restrictions may be considered following consultation.

Careful scrutiny of ASIC’s proposed wording is warranted here:  Some options are not CFDs – and we expect ASIC’s intention is to facilitate the calculation of margin requirements for CFDs over options rather than to bring options generally within the CFD PIO.

The drafting also repeatedly refers to the “premium paid by the client for the CFD”. It is not clear that all CFDs over options involve a payment that would naturally be characterised as a premium (which is language more ordinarily extended to actual options products). ASIC may wish to consider whether a broader concept, such as consideration paid for the CFD, would better capture the range of product structures currently available.

Implications

For those that offer CFDs over options this would likely require changes to margining and leverage requirements. It would also likely require amendments to PDS and other disclosure documents.

However, as many issuers do not offer these products this has limited relevance.

For those who offer options it would be sensible to discuss with ASIC the definitions of options and premium in the proposal to ensure these are scoped out.

Also, the drafting would benefit from an example confirming how issuers should identify the relevant underlying, and therefore the applicable initial margin rate, where a CFD references a complex or multi-asset option.

Digital assets

ASIC proposes to replace references to “cryptoassets” with the broader concept of “digital assets” and to expand the CFD definition so that products settled through the transfer of digital assets may fall within the CFD PIO. The amendments appear intended to future proof the regime by moving away from terminology focused on cryptocurrency and instead capturing a broader range of blockchain based and tokenised assets.  It also better aligns with ASIC’s terminology in INFO 225, and the Corporations Amendment (Digital Assets Framework) Act 2026 which comes into effect next year.

This proposal appears directed at products such as perpetual swaps, crypto futures and other digital asset derivatives that may have the same economic characteristics and risks as CFDs but differ in certain ways, including in how they are settled.

For example, a Bitcoin perpetual swap where a retail client posts USDC as collateral, obtains leveraged exposure to Bitcoin price movements and, on close out, receives settlement through the transfer of digital assets rather than a cash payment.  The outcomes for this are similar to a cash settled CFD.  However, under the current definition of CFD, this does not fit comfortably within a framework that only considers settlement in cash or by set off. ASIC’s concern appears to be that products with the same economic characteristics and risks as CFDs should be subject to the same consumer protections regardless of settlement mechanics. We have helped clients roll out perpetuals and crypto futures, and this is the position taken by industry and this clarification is welcome.

While the amendments expand the scope of the CFD PIO to capture digital asset settled products, ASIC has not amended key definitions such as “net equity”, margin close out and negative balance. The definitions should have been updated to reflect that net equity (which in turn drives both negative balance protection and margin close out calculations) may be in the form of digital assets. At present, it is not part of the definition.

The operation of net equity is also more complex where digital assets are used as collateral or settlement assets. For example, how should net equity be calculated where an account holds multiple digital assets, each with potentially different volatility and liquidity characteristics? Similarly, it is possible that the value of a digital asset used as collateral may fall significantly (thus reducing the net equity) even where the underlying CFD position(s) are profitable, potentially affecting margin requirements and margin close-out calculations. Is it ASIC’s expectation that in this situation a position would be closed out?

The amendments do not address the practical treatment of digital assets when compared with traditional concepts such as “derivative retail client money”.

The proposal is principally directed at the scope of the CFD PIO rather than the broader regulation of digital assets. Questions relating to the treatment of digital assets as collateral, custody arrangements and wider digital asset market infrastructure are likely to continue to be considered through ASIC’s broader digital asset work rather than through the CFD PIO itself.

Is a change to “Digital assets” a change to leverage?

Another issue that may warrant further consideration is how the proposed digital asset amendments interact with tokenised financial products. ASIC’s proposed approach appears straightforward where the underlying is a native digital asset such as Bitcoin. However, it is less clear how the leverage and margin framework should operate where the digital asset itself represents another financial product, such as a tokenised share or other security (using the guidance set out in INFO 225).

For example, if a CFD references a tokenised share, should the product be treated as a CFD over a share or as a CFD over a digital asset? On one view, the proposed amendments are intended to ensure economically equivalent products receive equivalent treatment regardless of settlement mechanics. If so, a CFD referencing a tokenised share may be expected to receive the same treatment as a CFD referencing the underlying share directly. However, the drafting does not expressly address this issue and industry participants may wish to seek clarification from ASIC.

Implications

ASIC should clarify whether the classification turns on the economic exposure or the technological form of the underlying.

Margin netting

ASIC is clarifying that margin must be calculated on each CFD even when, say, a long and short exposure over the same underlying market is held by the same client and their real economic exposure is offset by the two positions. This amendment follows ASIC’s 2024-25 sector review, during which ASIC identified margin netting practices that it considered inconsistent with the PIO. ASIC reported that, following its intervention, 28 issuers refunded more than $36 million to affected retail clients. As a result, this amendment is unlikely to represent a significant change for most issuers, with many having already amended their practice.

Implications

Given the substantial work ASIC undertook on this in 2024, industry practices have already changed where necessary.

Inducements

ASIC proposes to tighten the existing exception for discounts and other incentives.

Discounts would remain permitted, but only where they are offered on substantially the same terms to all retail clients and prospective retail clients, are clearly disclosed and satisfy new record keeping requirements. ASIC also proposes additional requirements relating to educational and research tools to ensure they are not used as trading inducements.

Curiously, despite expanding the CFD definition to accommodate digital asset settlement, ASIC has not made corresponding amendments to the prohibited benefit provisions. ASIC may consider the existing concepts sufficient to capture digital assets. However, the interaction between digital asset settlement and the inducement provisions is not expressly addressed.

Implications

Issuers that rely on promotional campaigns, rebate arrangements, volume discounts or educational tools as part of client acquisition strategies should review those arrangements carefully. The proposed changes are likely to require updates to marketing practices, compliance frameworks and record keeping processes.

For issuers already offering transparent, generally available fee discounts, the changes may be disclosure and record keeping. Targeted, personalised or conditional campaigns may require substantive redesign or withdrawal.

The practical effect is likely to be greater scrutiny of targeted promotional campaigns and a stronger documentary trail demonstrating that discounts satisfy the exemption condition.

What hasn’t changed

Importantly, many things are not likely to change.

There are no changes to the fundamental retail protections in respect to leverage (subject to the point on digital assets above), margin close-out protections, the overall prohibition on inducements and negative balance protection.

Unlike in other jurisdictions, the CFD PIO is also not being extended beyond CFDs. ASIC has undertaken broader work in relation to a range of derivative products and digital asset related offerings such as options and futures. However, the current consultation does not propose comparable reforms for those other classes of derivatives.

This suggests ASIC’s immediate focus is on addressing specific issues that have emerged in the operation of the CFD regime rather than undertaking a broader reconsideration of the regulation of retail derivatives.

What happens next?

First, this consultation is for four weeks.

Second, ASIC is separately seeking evidence on whether CFDs over options that expose retail clients to losses greater than the premium should continue to be available to retail clients at all. ASIC states that it has not formed a view on that issue and is not currently proposing a prohibition. However, the request for submissions indicates that further restrictions remain under active consideration.

What should you do now?

Consider contributing to the consultation, and start thinking about what documents and processes you’ll need to review.  We’ve acted for most of Australia’s larger CFDs providers and would welcome the opportunity to discuss this with you.

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Author: Greg Patton (Special Counsel)