The Australian Securities and Investments Commission (ASIC) has imposed an interim stop order preventing Stratos Trading Pty Limited, trading as FXCM, from issuing CFDs to retail clients
The Australian regulator identified deficiencies in the broker’s target market determination (TMD).
ASIC said it acted because FXCM’s TMD inappropriately included investors with a medium risk appetite in the target market for its CFDs.
The regulator noted that risks associated with trading CFDs – including leverage, volatility, liquidity and pricing risk – make these products unlikely to be suitable for medium-risk investors, regardless of other investment criteria outlined in the TMD.
The stop order bars FXCM from issuing CFDs to retail clients and from opening new retail trading accounts for those products. Existing clients may continue to vary or close their open positions.
It applies to CFDs referencing currency pairs and forex baskets, treasuries and commodities, stock indices, stocks and stock baskets, and cryptocurrencies.
The order is valid for 21 days unless revoked earlier.
ASIC stated that the action aims to prevent CFD products being sold to consumers whose financial objectives, situation or needs are unlikely to align with the risks of the products.
The regulator’s move comes under the design and distribution obligations (DDO) regime, which requires financial product issuers to define an appropriate target market based on a product’s risks and features, and to implement distribution conditions that help ensure products reach only suitable consumers.
ASIC has tightened oversight of CFDs in recent years. After reviews in 2017, 2019 and 2020, ASIC introduced a product intervention order to strengthen consumer protections; that order was extended in April 2022 for five years, through May 2027.
ASIC has also continued to review how issuers are meeting DDO requirements.
In September 2023, the regulator released Report 770, highlighting concerns such as issuers’ reliance on client questionnaires and limited use of available data to guide distribution.
A subsequent review, published in September 2024 as Report 795, assessed compliance with the reasonable-steps obligation for high-risk products, including CFDs, and identified further areas for improvement.
