Australian Securities & Investments Commission (ASIC) today announced issuing eight interim stop orders against Saxo Capital Markets (Australia) Limited’s Saxo’s CFDs offering to retail investors.
The Aussie regulator explained it has targeted Saxo has for deficiencies in the broker’s target market determinations (TMDs) of some contracts for differences (CFDs) offerings. ASIC also noted that Saxo quickly addressed ASIC’s concerns ad amended the TMDs to, and the orders were revoked.
ASIC’s stop orders affected eight types of derivatives Saxo offers to retail clients, including single stock CFDs, FX CFDs, exchange-traded funds (ETFs) CFDs, index CFDs, commodity futures CFDs, bond CFDs, index options CFDs, and cryptocurrency derivatives.
ASIC found Saxo’s TMDs for derivative products to be inappropriate, particularly concerning retail clients who use CFDs as a significant part of their investment portfolio, clients with investment timeframes of up to one year or up to three years, and specific instruments sought by retail clients for growth and income.
CFDs are derivative contracts with leverage that enable traders to speculate on the value of underlying assets. These financial instruments are widely recognized as high-risk, prompting ASIC to impose regulations on their trading.
The introduction of design and distribution obligations (DDO) by ASIC in October 2021 requires product issuers and distributors to prioritize consumers’ interests. Under the DDO, financial product issuers are required to “clearly define target markets for their products appropriately, having regard to the risks and features of their products.”
ASIC said:
ASIC made the interim orders to protect retail clients from acquiring CFDs from Saxo, where they may not be suitable for their financial objectives, situation or needs. The orders did not prevent Saxo’s existing clients from varying or closing their CFD positions.
