Changes for retail clients: what you need to know
ASIC has changed the way we can offer our products and services to retail clients of our ASIC licensed entity. We’ve put together a summary of the main changes below to help you understand these and how they may affect you. These changes have come into effect.Find out more about ASIC's product intervention here or you can always contact us at support@pepperstone.com.
Changes to leverage caps
A key change is leverage restrictions, which will affect the amount of margin retail clients are required to deposit to open any new CFDs or FX positions. Here’s what's changed from 29 March 2021, onwards:
- 30:1 leverage on major currency pairs
- 20:1 leverage on major indices, gold and minor currency pairs
- 10:1 leverage on commodities (excluding gold) and minor indices
- 2:1 leverage on cryptocurrency assets
- 5:1 leverage on shares or other underlying assets
Compulsory margin close outs
If the funds you hold in your account fall to less than 50% of the margin required for all of your open trades, then we'll be required to close out positions.
Important: any existing positions opened prior to 29 March will also be subject to the new 50% margin close out requirement. This means that you may need to deposit more funds into your account to cover the additional margin required and avoid your positions being closed-out. It's your responsibility to be aware of your margin requirements and continue to monitor your positions.
Changes to leverage caps
A key change is leverage restrictions, which will affect the amount of margin retail clients are required to deposit to open any new CFDs or FX positions. Here’s what's changed from 29 March 2021, onwards:
- 30:1 leverage on major currency pairs
- 20:1 leverage on major indices, gold and minor currency pairs
- 10:1 leverage on commodities (excluding gold) and minor indices
- 2:1 leverage on cryptocurrency assets
- 5:1 leverage on shares or other underlying assets
Compulsory margin close outs
If the funds you hold in your account fall to less than 50% of the margin required for all of your open trades, then we'll be required to close out positions.
Important: any existing positions opened prior to 29 March will also be subject to the new 50% margin close out requirement. This means that you may need to deposit more funds into your account to cover the additional margin required and avoid your positions being closed-out. It's your responsibility to be aware of your margin requirements and continue to monitor your positions.
Compulsory margin close outs
If the funds you hold in your account fall to less than 50% of the margin required for all of your open trades, then we'll be required to close out positions.
Important: any existing positions opened prior to 29 March will also be subject to the new 50% margin close out requirement. This means that you may need to deposit more funds into your account to cover the additional margin required and avoid your positions being closed-out. It's your responsibility to be aware of your margin requirements and continue to monitor your positions.
Changes to leverage caps
A key change is leverage restrictions, which will affect the amount of margin retail clients are required to deposit to open any new CFDs or FX positions. Here’s what's changed from 29 March 2021, onwards:
- 30:1 leverage on major currency pairs
- 20:1 leverage on major indices, gold and minor currency pairs
- 10:1 leverage on commodities (excluding gold) and minor indices
- 2:1 leverage on cryptocurrency assets
- 5:1 leverage on shares or other underlying assets
Margin close out: worked example
You're trading AUDUSD and the margin currency is AUD. You have an account with a balance of $1,000 and you enter a trade of 1 standard FX lot ($100,000) at a leverage of 500:1 (before the ASIC changes take effect). The initial margin requirements are 100,000/500 (leverage) = $200. This is the amount you need to open the trade.
Currently, once the trade is opened, you are required to maintain a minimum of 20% of the value of the initial margin in your account, otherwise you'll be closed out, 20% of $200 = $40. If your account balance falls to $40 or less, the trade will be closed out automatically.
After ASIC's changes take effect, even if you opened the trade before 29 March, your equity will need to be a minimum of 50% of the initial margin, 50% of $200 = $100. This is a $60 increase from before the rules came into effect.
Let’s say the market unfortunately moves against you and you incur a loss of $910, meaning you have $90 of equity left in your account ($1,000 - $910) and your Equity/Margin ratio 45%, equity ($90) ÷ initial margin ($200) = 45%.
Under the current rules, your trade wouldn't be closed. However, under the new rules, your equity has dropped below the 50% requirement and your trade will be automatically closed out.
To avoid the trade closing out, you'll need to add additional margin to your account before the 50% close out ratio is reached.
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Will I be affected?
The ASIC changes will impact retail clients only, not wholesale clients.
You may be able to become a wholesale client (or 'Pepperstone Pro'). It's important to note that you'll lose some retail-only protections if you become a Pepperstone Pro, so you must consider this in your decision-making. If you're interested in finding our more about becoming a Pepperstone Pro, please visit our Pepperstone Pro page. We’ve included a summary below of the eligibility requirements, but please refer to the Pepperstone Pro page for full details.
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