CFD brokers offer online trading services in a market that is relatively less regulated than traditional security exchanges where actual securities are traded. In recent years, the need for regulation in the industry has become a necessity. One of these top-tier regulators is the Australian Securities and Investment Commission (ASIC) which was founded in 1998 following the Wallis report on the Australian financial system with the purpose of enforcing and regulating company and financial services in Australia and territories under Australian control.
A regulated broker that complies with the rules and requirements set by ASIC ensures that funds are safe but perhaps the great of ASIC compared to other top regulators is the no restriction on leverage ratio. A high leverage ratio means low margin requirements which can result in high profits but also high risk. While most regulators restrict leverage ratio to 1:30 to retail clients, ASIC allows regulated brokers to offer online trading with a leverage ratio that ranges between 1:200 to 1:500.
ASIC is a regulator to some of the largest brokers in the industry, as it provides a safe and secure trading environment for brokers as well as for the traders. We have listed the top three ASIC brokers in 2020 in terms of trading conditions, fees, unique features, reputation, selection of products, etc. Keep on reading to find out more.
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Best ASIC Regulated Brokers in 2020
ASIC regulated brokers are considered safe and secure at the same level as other top financial regulatory agencies such as FCA, CySEC, and FSA. However, while other top regulators limit trading conditions, ASIC adopts a less strict approach to regulate the forex and CFD market. Here are some major advantages of the Australian regulator in comparison to other top worldwide regulators.:
- ASIC ensures that client funds are being kept in segregated accounts in Australian banks
- ASIC does not have any limitations as to the FIFO rule that prohibits users from opening multiple positions and trades on the same currency pair
- ASIC has no significant leverage (margin requirement) limitations
The procedure for getting a license from ASIC is strict; every broker that applies for ASIC license must submit requirements set out for them by the Australian regulator and can be considered safe for retail. In fact, ASIC regulated brokers should have a minimum of $1AUD million in operating capital and must be completely transparent about their operation.
Here are our top picks for the best ASIC regulated Brokers in 2020:
1. AvaTrade - Best ASIC Regulated Broker
AvaTrade is registered under Ava Capital Markets Australia Pty Ltd which is licensed and regulated by the Australian Securities & Investments Commission (License No.: 406684). But apart from being regulated by ASIC, AvaTrade is also regulated by other top-tier regulators such as FCA, the Central Bank of Ireland, The B.V.I Financial Services Commission, the Financial Services Agence (FSA), and the South African Financial Sector Conduct Authority (FSCA).
Founded in 2006, AvaTrade is considered by many traders to be one of the most reputable and solid brokers in the market. In other words, AvaTrade is a broker for professional traders although it can be a good match for beginners who want to gain knowledge and trading skills. AvaTrade offers a selection of four trading platforms (web and desktop-based versions) and an automated trading feature that simply allows users to copy signals and recommendations from other top traders.
- A highly regulated broker
- A wide selection of trading platforms including automated trading tools
- A leverage ratio of 1:400
- The withdrawal process takes 1-2 business days
- AvaTrade charges an inactivity fee
2. eToro - Best Social Trading Platform
eToro is regulated in the United Kingdom, Cyprus and Australia. In fact, the broker operates in more than 140 countries, including 30 states in the United States (cryptocurrency trading). In Australia, eToro AUS Capital Pty Ltd. is regulated by the Australian Securities and Investments Commission (ASIC) (License number 491139).
When it comes to trading services, eToro is a unique broker with different features and tools than any other trading platform in the market. It is the largest social trading platform in the world, with a wide range of products and markets categorized into stocks, commodities, indices, currency pairs, ETFs, market portfolios, and cryptocurrencies.
One important thing to note is that eToro offers the following leverage limitations for clients in Australia: 1:400 for currency pairs, 1:100 for commodities and indices, 1:20 for CFD stocks, 1:10 for other CFD stocks and ETFs, and 1:2 for cryptocurrency CFDs
- eToro has zero commission on stock CFD trading
- eToro allows you to collect dividends if you are trading a stock, ETF or index that pays dividends
- A high leverage ratio
- The popular MetaTrader4 platform is not available
- Limited research tools
3. Plus500 - Best Trading Platform for Beginners
Plus500 was founded in 2008 and is ASIC regulated since 2013, in addition to being regulated by CySEC and FCA. In our view, Plus500 is more suitable for beginners who want to trade CFDs. The UK-Based broker, which is listed on the London Stock Exchange, has an extensive range of more than 2000 CFD instruments.
Compared to other trading platforms in the market, Plus500 offers extremely low spreads on shares, ETFs, cryptocurrencies, indices, options, commodities, and currency pairs. In general, Plus500 was designed to provide all levels of traders with immediate execution at a low cost. You will not get overwhelmed with the platform as it provides the most basic information but if you are looking for a reliable and user-friendly trading platform, Plus500 is a valid option.
- Plus500 offers more than 2000 instruments including options
- Offers the Negative Balance Protection tool
- Low spreads and trading fees
- Plus500 does not support the MetaTrader4 trading platform
- Limited technical analysis charting tools
What Should You Look for in ASIC Regulated Broker?
It is true that trading with an ASIC regulated broker should always be the preferred option, however, there are other factors you must consider. First, you need to identify the type of trading strategies you wish to apply. Then, you should take into consideration that in trading, small things make a big difference and therefore you must look for a feature or a tool that might give more promising results.
Basically, a regulated broker ensures your funds are held in a safe segregated account and that the broker must follow a series of rules instructed by the regulator. However, with the rise of cyberattacks, additional security features are needed. Therefore, you have to find out what kind of security features are available. eToro and AvaTrade, for instance, allow you to set the two-factor authentication (2FA) to protect your account from hackers. eToro also protects your personal information under SSL encryption.
Spreads and Fees
Brokers make money by charging different commissions and take the buy and sell spread. The majority of forex and CFD brokers charge similar fees but the most important factor is the spread. Therefore, you may get tight spreads if you decide to trade with a broker that has high liquidity (whether it is a market maker or ECN/STP broker).
That is another reason why it is best for you to choose a well-known broker with a large number of users and deep liquidity connections such as one of the brokers on our list.
Leverage Ratio/Margin Requirements
Unlike other top worldwide regulators, ASIC does not impose any limitationS on the maximum leverage brokers can offer. However, you must remember that leverage works in both directions, it can significantly increase your profits while on the other, it also increases your risk of losing your money. Therefore, you must find the right balance. As always, the key is to try different ratios until the point you feel comfortable with a certain level of leverage. Nevertheless, the idea that ASIC has no limitations to leverage trading is an advantage rather than a disadvantage. In Australia, eToro and AvaTrade offer a leverage ratio of up to 1:400 while Plus500 maintains a leverage ratio restriction of up to 1:300.
Social Trading Platform
Trading is an individual activity but that has changed throughout the past decade. New social trading platforms have emerged but none of them has gained popularity like eToro social platform. Simply put, a social trading platform is a social network where users can interact with each other, share ideas, and even copy trades of other members on the network.
eToro is the leading social trading platform in the market with more than 4.5 million registered users on its platform. Furthermore, eToro has developed new tools and features such as the CopyTrader and the CopyPortfolio to make social trading easier.
Automated Trading Availability
In the past several years, automated trading has become available for individual traders who can invest a small amount of money. In simple terms, automated trading is a program that allows traders to set rules for executing trades which can be based on statistical parameters or market sentiment tools.
Only a few retail brokers offer the ability to automate your trading but while some brokers allow you to automate your trading by programming your own algorithms, AvaTrade is the best option out there as it allows you to install signals service providers in order to automatically enter and exit trades.
As previously mentioned, you must find a broker that meets your specific needs as a trader. One might look for a high leverage ratio (most suitable for automated trading or scalping), while others will search for protection tools such as the Negative Balance Protection (available at Plus500) which is an automated notification in case the account balance becomes negative after an unsuccessful trade.
Regardless, factors such as withdrawal process, customer support communication channels, available payment methods, special trading tools, and an overnight (rollover) interest rate fee – all of these can make a huge difference in your trading performance.
Regulation in the forex and CFD market serves to provide a safe and secure environment for those who want to enter the market. Any ASIC regulated brokers must maintain the integrity of offering financial services to clients and ensure that investors are safe at all times.
The Australian Securities and Investment Commission (ASIC) has a much easier approach in terms of trading conditions compared to other well-reputed regulatory agencies such as FCA, CySEC, CFTC, and CySEC. However, ASIC has made clear that it will be even more strict in its approach to protect investors by ensuring that the rules and requirements are followed.
What is the ASIC?
ASIC is an independent organization that acts as Australia's financial regulator. The main roles of ASIC are to enforce and regulate financial services firms in order to protect clients from manipulation and fraud. ASIC is one of the most active regulators in the Fintech market, including the regulatory framework of online trading services.
Why should you trade with an ASIC regulated broker?
ASIC makes sure that broker companies comply with regulations and laws about their financial and operational activity. In other words, an ASIC regulated broker must submit reports for audit, resolve any conflict between the client and the company, hold funds in segregated accounts, prohibits unfair bonuses and promotions, and enforce brokers to participate in trader's insurance schemes. In terms of trading, ASIC is considered a top choice for trades due to the lack of leverage restrictions, the no prohibition of hedging trades, and the elimination of FIFO rule.
How do I know if a company is ASIC regulated?
First, visit ASIC's official website on this link. Under the Within, choose 'Business Name Index' and type in the name of the broker. Then, you can see if the broker is registered with the Australian Securities and Investment Commission (ASIC).