The Australian financial market regulator has cancelled the license of retail forex and contracts for differences (CFDs) issuer XTrade.AU Pty Ltd, operating as XTrade, due to a range of lapses.

ASIC Cancels XTrade’s License

Announced today (Thursday), the broker also moved to the Administrative Appeals Tribunal (AAT) on 29 April 2024 for a review and stay of the Australian Securities and Investments Commission’s (ASIC) decision to cancel the Australian Financial Services (AFS) license. However, the AAT refused to grant a stay order, meaning the license will remain cancelled until a final decision is made.

XTrade operated as a retail over-the-counter (OTC) derivatives issuer, offering risky CFDs and FX contracts to its customers. CFDs offer leveraged trading opportunities, allowing traders to speculate on the change in value of an underlying asset.

Although it will not be able to offer services in Australia with a cancelled AFS license, the brand will continue to operate in overseas markets with its licenses from Belize and South Africa.

Severe Operational Violations

According to the Australian regulator, between June 2018 and September 2022, XTrade failed to comply with the general obligations of an AFS license holder. The broker was engaged in “unconscionable conduct.”

The regulator further pointed out that XTrade failed to “take reasonable steps to ensure that its representatives complied with financial services laws” and “did not have adequate arrangements for the management of conflicts of interest.” Additionally, the broker did not ensure that its “retail product distribution was consistent with its target market determination” or that its services were being offered “efficiently, honestly and fairly.”

Apart from the operational lapses, the regulatory investigation found that the broker had “put its own interests above those of its clients and did not act in good faith.” Furthermore, the brokerage representatives were engaged in misconduct for many years, and it failed to ensure that they underwent adequate training.

ASIC has been very strict with CFD brokers recently, especially regarding their services to retail traders. The broker already introduced heavy restrictions in the industry, lowering the offering leverage to up to 30:1.

The regulator also issued temporary stop orders for design and distribution obligations (DDOs) violations against several popular CFD brands, including TMGM, Saxo, and Mitrade. It sued eToro for DDO violations, the first such action against a broker.