The Australian Securities and Investments Commission (ASIC) confirmed the remade class order, defining the financial requirements of retail over-the-counter (OTC) derivatives issuers, on Friday.
The order for extending the requirements for five more years came as its previous order was set to expire on 1 October. Additionally, the regulator issued a public consultation paper before issuing the order.
It mandates retail OTC derivatives issuers, holding Australia Financial Services (AFS) license to meet a minimum tangible asset requirement of AU$1 million or 10 percent of their average revenue. Half of the required net-tangible assets held by these companies must be cash and cash equivalents, whereas the other half should be liquid assets.
Further, the derivatives issuers need to prepare quarterly projections of their annual cash flows. And, if the AFS license holders fail to comply with the requirements, they also need to comply with trigger point reporting obligations .
“The financial requirements aim to ensure Australian financial services licensees have adequate financial resources to operate their business in compliance with the Corporations Act 2001, and to manage the operational risks inherent in the OTC derivatives market,” the regulator stated.
ASIC’s Other Intervention Orders
Meanwhile, the Australian regulator is bringing restrictions to minimize the risks of retail traders. It recently extended the ban on binary options until 1 October 2031, which originally came into effect in May 2021.
Furthermore, ASIC brought heavy restrictions on leverages offered by regulated brokers to retail clients and on their marketing tactics. Earlier this year, it extended those restrictions for five more years until 23 May 2027.
