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ASIC leverage caps

Australia's product intervention order, in force from 2021, limiting retail CFD leverage to 30:1 on major currency pairs and lower on other classes, with close-out and negative balance requirements.

ASIC's order broadly mirrors the European tiers: 30:1 on major currency pairs, 20:1 on non-major pairs, gold and major indices, 10:1 on other commodities and minor indices, 5:1 on shares, and 2:1 on crypto-asset CFDs. It also requires a 50% margin-close-out-rule, negative-balance-protection and restrictions on inducements.

The change mattered beyond Australia because a large number of brokers used Australian licences to serve international clients at several hundred to one. Many responded by routing non-Australian clients to group entities in other jurisdictions, which is a common pattern described in offshore-broker.

Australia retains a professional and wholesale client route with different thresholds from the European one, so the same firm can offer very different leverage to two clients on the same instrument.

Example: a retail Australian client trading AUD 100,000 of AUD/USD posts about 3.33% under the cap. Before 2021 the same client might have posted 0.5% at 200:1.

Related: esma-leverage-caps, offshore-broker, margin-close-out-rule, negative-balance-protection

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Margin and leverageA small deposit controlling a much larger position, and the point at which losses trigger a margin call.Position you controlnotional value $100,000your margin deposit: $5,000$100,000 / $5,000 = 20:1 leverageYour deposit absorbs every dollar of loss$5,000$2,500$0Equity leftMARGIN CALLequity has fallen to $2,5000%1%2%2.5%3%4%5%How far the price moves against you
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.

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