The Rising Popularity Of Australian FX Brokers Through ASIC Regulation
Australia is a popular investment destination that has spawned a large number of reputable and trusted Forex brokers over the years. In its modern guise, Australia is seen as a leader in the Forex marketplace and is highly popular for its commitment towards the highest level of investor safety and ease of doing business for multi-national corporations. Australia has quickly learned from its past mistakes and has taken every criticism in its stride to be a global phenomenon in the Forex market. All Australian Forex brokers are regulated and licensed by the Australian Securities and Investments Commission (ASIC), which has been the primary regulatory authority for all non-banking financial companies since 1989. The ASIC incorporates several rules and guidelines that are outlined in the Australian Securities Commission Act for supervising the activities of financial companies to ensure the unprecedented safety of operations and complete financial transparency.
What Are The Rules That Govern ASIC Regulated FX Brokers?
ASIC started its regulatory operations way back in 1989, but the modern version of the ASIC and the regulatory policies were framed in 2001, as per the numerous requirements posed by the online financial markets. The ASIC is an independent regulatory agency that supervises and licenses the various financial companies operating in Australia according to a framework that is designed and updated by the Australian Parliament. The Government is responsible for creating the various statutory laws that govern the operation of all financial entities in the country, but it is the duty of the ASIC to implement such policies in the financial marketplace. The Australian Stock Exchange was formally brought under the ASIC regulation in 2009, which allowed Australian Forex brokers to offer all Australian financial instruments as a regulated product to its various investors. ASIC regulated Forex brokers are expected to comply with several regulatory policies that are designed to minimize all instances of broker scams and fraudulent financial practices. Here are some of the primary regulatory policies that are imposed on ASIC Forex brokers as per the Australian Forex regulatory guidelines:
1. ASIC has barred any Forex trading company from operating in Australia without a valid ASIC regulatory license. Australian Forex brokers should hold a verified ASIC license if they wish to cater to traders and investors from Australia. The ASIC has also warned its citizens about the adverse effects of trading with unregulated entities and is also known to proactively block all websites that cater to Australian traders without the ASIC consent.
2. The ASIC has evolved from its past shortcomings and has stipulated minimum AUD 1 million in operating capital for all Australian FX brokers, in a bid to increase the capital adequacy of companies and to reinforce trust among traders. Higher minimum operating capital ensures that a company is able to withstand the fluctuations of the currency markets without acceding to the market volatility. Higher minimum capital is also essential for brokers to maintain their clients’ orders in the market during high-volatile events, without facing any risks of debt or eventual bankruptcy due to an uncontrollable amount of negative balance for its clients’ accounts.
3. ASIC Forex brokers should not have any conflict of interest with its customers, which is one of the primary reasons why a majority of Australian Forex brokers choose ECN as its preferred trading protocol. Australian Forex brokers are highly popular in the market for their Direct Market Access trading accounts that have no conflict of interest whatsoever. DMA trading through ECN/STP not only offers direct access to liquidity providers, but it also provides the best spreads and the lowest trading costs when compared to regular market maker brokers.
4. Forex brokers in Australia are subjected to the most detailed audits through independent auditing agencies, and the ASIC reviews all of their member’s audit reports periodically to ensure that the broker complies with all existing regulations.
5. Segregation of clients’ account is another protective measure imposed on ASIC Forex brokers to prevent any form of financial discrepancies. As per the segregation guidelines, Australian FX brokers should hold its own company funds away from its clients’ capital, and brokers should show proof of segregation to the ASIC upon request. There are multiple benefits of using segregated accounts, which include the ability to differentiate the broker’s money from its clients’ trading funds. Therefore, in the case of any emergency of default or other legal issues, it will be easy for the ASIC or other authorities to ensure that client funds are protected from broker redundancies.
6. Forex traders from Australia are further protected through insurance schemes and other consumer protection plans to protect their funds against broker-related problems such as insolvency and bankruptcy. The ASIC also deals with financial scams in a strict manner and encourages its citizens and other individuals to act as whistleblowers against any company if they commit any grave offense. At times, the ASIC also performs surprise investigations into allegations and is quick to suspend licenses and penalize companies for failure to adhere to the existing regulatory guidelines.
The Customer-Friendly Attitude Displayed By ASIC Forex Brokers
Australian Forex brokers are among the best when it comes to offering a professional and friendly customer service for all traders, regardless of their origin or the magnitude of their account capital. Both small, as well as large traders, receive the most comprehensive customer service and immaculate support for clearing all of their account issues. Even the ASIC is responsible for ensuring the best in customer support, which is further reinforced through ASIC’s several customer-centric initiatives. The ASIC plays a huge role in ensuring that all investors are well-versed in the different aspects of the financial markets and investments as a whole. ASIC’s several educational programs and initiatives are rather useful in countering broker scam, and also help investors to have a good understanding of the risks in the financial markets.
Are There Any Trading Restrictions Imposed By ASIC Regulated Brokers?
Traders often prefer to invest their money with a company that allows them to trade the markets freely and without any restriction. In this regard, several leading regulatory organizations such as the NFA and the CFTC of the USA have pretty stringent trading conditions that limit the amount of freedom available to traders while investing in Forex and CFD products. For example, traders from the US can only use a maximum leverage of 1:50, while they are unable to hedge or open multiple positions on a single currency pair. ASIC, on the contrary, does not impose any such restrictions on its investors, as they are free to trade the markets anyway they desire. Most Forex brokers from Australia offer a high leverage of 1:500, while some brokers may provide an even higher leverage for smaller retail traders. Traders have the full freedom to hedge, scalp, and open multiple positions on a single currency pair without any FIFO restrictions. Since most Aussie Forex brokers offer ECN/STP trading accounts, traders are also free to trade the markets during news events and highly volatile market sessions without any limitations.
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What Is The Average Minimum Investment For Opening An Account At Australian Forex Brokers?
Australian FX brokers don’t have any high minimum trading capital requirements, as most brokers allow its clients to start trading with $100. Some brokers might require a higher investment of $500 or $1000, but a regular ECN/STP account should be available for as little as $100. Of course, there are a few micro account brokers that offer micro trading accounts for as low as $5, but such types of companies are relatively rare in the Australian financial markets. Although Forex brokers in Australia are required to satisfy high broker capital requirements, there are several business benefits and advantages that enable companies to lower their costs and offer a cost-effective trading account to its customers. After all, the viability of a business model depends on the broker’s ability to make profits, and the ASIC understands that facilitating a business-friendly environment is key to ensuring the long-term sustainability of a Forex brokerage.
Ensuring The Authenticity Of ASIC Regulation For Forex Brokers From Australia
Forex brokers that are regulated by the ASIC are provided an Australian Financial Services Licenses (AFSL), which is accompanied by a financial services registry number and an official ASIC seal. All Forex brokers regulated by the ASIC should display its official seal of approval and license number on its official website, and the broker should readily provide such information upon request. All ASIC regulated members are also officially listed on the ASIC website, which provides a further reference to ensure the authenticity of the license. However, there have been several claims of unverified ASIC regulatory licenses that brokers may use to trick traders into opening an account and investing their money with the broker. In other cases, several deregulated ASIC brokers and companies that have had their licenses suspended by the ASIC will continue to use the ASIC logo without informing its clients about the legal validity of such a license. Therefore, the ASIC does encourage its citizens always to cross-check the regulatory information provided on a broker’s website with the verified information listed on the ASIC official database, which should help in avoiding a majority of scams in the financial markets.
Choosing The Best Australian Forex Broker
Choosing the best ASIC regulated Forex broker from Australia can be a tough job, especially since there are a number of highly regulated and genuine Forex brokers from the country that offer a decent Forex trading service. Some brokers also go beyond their means to provide the most competitive service packages and bonuses to cater to new clients. However, we have created a comprehensive list of our highly recommended Australian FX brokers that should be able to provide you with the best trading products according to your investments. Nevertheless, you should always make it a priority to first trade on a demo account to ascertain the authenticity and reliability of a broker before investing your trading capital in a live trading account.