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ASIC Benchmarks

ASIC Benchmarks


 

In accordance with ASIC requirements, below is the information which will assist you in understanding key details about AxiTrader.

Benchmark 1: Client Qualification

AxiTrader operates a client qualification policy that is designed to ensure that Australian resident clients have appropriate experience in or knowledge and understanding in AxiTrader’s derivative products. This policy has been developed by reference to ASIC Regulatory Guide 227 and best industry practice.

Applicants can demonstrate appropriateness by satisfying one of the three criteria below:

  • Demonstrated trading experience in the same or similar products; or
  • Pass a multiple choice quiz designed to demonstrate adequate knowledge of the products and financial markets; or
  • Complete a training course that meets the minimum requirements.

A diagrammatic explanation of the above exists further down the page.

1. Sufficient Trading Experience

In order to establish that an individual has had appropriate experience, account applicants must be able to demonstrate all of the following. That they have:

  • Within the past three (3) years, operated a Margin Forex or CFD or Futures account; and
  • Had at least two months of trading experience; and
  • Conducted at least 20 transactions on a non-advised basis.

If a potential client fails to completely satisfy all three of the above criteria, then they either attempt the quiz (part 2) or attend a training course (part 3)

2. Multiple-choice quiz:

In order to qualify as a potential client for AxiTrader, you must record a pass score (of 70% or greater). The quiz consists of 10 (ten) multiple choice questions, with at least one correct answer required from each of the following sections:

  • Previous experience in investing in financial instruments, including securities and derivatives.
  • Understanding of the concepts of leverage, margins and volatility.
  • Understanding of the nature of CFD trading.
  • Understanding of the processes and technologies used in trading.
  • Preparedness to monitor and manage the risks of trading.
  • AxiTrader has a large pool of suitable questions for each category from which the quiz questions are selected. These questions are altered each time the quiz is taken.

If a mark of 70% or greater is achieved, you will be deemed qualified to trade through AxiTrader. If a pass grade is not achieved, then you will be required to complete a training course, as per part 3.

3. Training Course:

To be deemed eligible to trade with AxiTrader, an individual must undertake and complete a training course that satisfies the following criteria:

  • A duration of 8-16 hours
  • If the course does not meet the minimum time required, then it will be deemed an insufficient qualification
  • Regulated by ASIC
  • The provider must operate under an AFSL that allows them to provide general financial product advice.
  • Provides ongoing support and coaching for a minimum 6 (six) week period.
  • You must provide AxiTrader with a copy of your certificate of completion.

If a training course fulfills all three of the above requirements, then an individual will be deemed qualified to trade with AxiTrader.

If you cannot fully satisfy one of the aforementioned elements, then you will not be considered qualified to be a client with AxiTrader.

RG227: Benchmark 1 - Client Qualification

Benchmark 2: Opening Collateral

AxiTrader offers a full suite of payment options for clients to fund their accounts.

AxiTrader provides credit card funding for the ease of providing secure electronic payment system to its clients. This is used for both instantaneously funding accounts and meeting margin calls.

AxiTrader does not encourage the use of leverage products with borrowed funds.

AxiTrader does not accept “cash equivalents” as opening collateral (e.g. no securities as deposits).

AxiTrader has chosen not to comply with ASIC’s suggested benchmark on Opening Collateral requirements, which suggest limiting initial funding by credit card to a maximum of $1000.

Benchmark 3: Counterparty risk (hedging)

AxiTrader implements strict controls to ensure that the procedures it adopts when managing exposure to market risk are followed. Further, AxiTrader ensures that the counterparties, with which it transacts to hedge client trades, are of appropriate financial standing. AxiTrader only hedges its positions through Tier 1 and 2 prime brokers that hold a minimum capital of 40 million USD (equivalent).

‘Hedging’ refers to the process where a financial service provider such as AxiTrader reduces or removes its exposure to market risk by entering into a corresponding transaction with another entity. AxiTrader’s main Prime Brokerage account is with Morgan Stanley. This is used in conjunction with several Tier 2 accounts, thus spreading the risk of a default on behalf of one of the hedging companies.

Furthermore, AxiTrader has enforced trading limits with its prime brokers, which are automatically applied and can only be adjusted by the CEO of AxiTrader, upon request.

Benchmark 4: Counterparty risk (Financial resources)

AFSL Compliance

Monthly financial reports are prepared to ensure compliance with AxiTrader’s AFSL Conditions and the financial requirements which are contained in ASIC Regulatory Guide 166.

An annual financial audit is also conducted by an ASIC approved auditor.

Stress testing of capital adequacy

The capital requirements and surplus position of AxiTrader is monitored on a daily basis. AxiTrader’s risk exposure that our clients face is calculated by our position keeper and reconciliation software in real time. This software is monitored by risk management staff, 24 hours a day, 5 days a week at all times whilst the foreign exchange markets are operating. Our free margin levels with our hedging counterparties are displayed at all times, showing how much market movement or increase in client position size can be sustained with the current level of funds.

Daily stress testing is conducted and alerts have been established at pre-defined levels to ensure that appropriate remedial action is taken in the event of market movements that are adverse to AxiTrader’s financial position.

Benchmark 5: Client Money

This document has been produced by AxiTrader to explain how client money is handled. The purpose is to provide clients with an insight into how client money is reconciled and segregated so that they are better informed to assess the safety of their funds in relation to other financial product providers.
All client money is held with National Australian Bank (NAB) and St George Bank, all of which are Australian Authorised Deposit-taking Institutions (ADIs).

The AxiTrader platform automatically emails clients when they fall below their required free margin level. When a client’s free equity falls below 20% of margin requirement, the client’s open positions will be instantly closed out. This helps ensure that the one client’s funds are not used to fund the positions of other clients.

AxiTrader creates an individual trading account for each client, which allows a complete record of transactions to be maintained, so that every client account is monitored and followed. Any default or outstanding payment is immediately followed up, to ensure that the client account stays in balance.

The Compliance Officer will ensure that all client funds are placed in segregated trust accounts and invested in accordance with the Australian Client Money Rules, ASIC Regulatory Guide 212 (titled ‘Client money relating to dealing in OTC derivatives’) and ASIC Regulatory Guide 227, where appropriate. We ensure that reconciliations of client monies are conducted and reviewed on a daily basis.

All client funds are kept in a segregated trust account, and any withdrawal from this account must be approved by two signatories, each with their own independent password. Because client funds are pooled, and in order to counteract the risk of client defaults affecting other clients’ funds, this process has the potential to expose clients to the risk of other clients defaulting on their payments, and pushing the client account into deficit.

Benchmark 6: Suspended or halted underlying assets

Foreign exchange markets trade continuously. They open at 05:00pm American EST* Sunday evening (Monday morning NZ time) and close at 05:00pm, American EST** on Friday (Saturday morning NZ time). They are open 24 hours during this period.
Prices are continuously streamed during this period. Because foreign exchange is not an exchange-traded product, it is not possible to suspend or halt the streaming of these prices.

For our futures, commodities and index products, AxiTrader will halt client trading and the use of client money in an asset or derivative when a trading halt exists for the underlying asset, or trading in the underlying asset has been suspended through an exchange or otherwise.




* Eastern Standard Time (America)

Benchmark 7: Margin Calls

AxiTrader provides all clients with the option of applying a ‘stop loss’ on any order they place, in order to prevent losses exceeding their desired maximum loss on a position. This does not guarantee that a ‘stop loss’ order will be executed at the desired ‘stop loss’ price.


AxiTrader’s system will automatically email clients when they fall below their required free initial margin level. This email instructs the client to either close some positions or deposit more funds to cover the margin requirement.

Furthermore, when a client’s free equity falls below 20% of free initial margin requirement, the client’s open positions will be instantly closed out, reducing the likelihood that clients enter negative equity.

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