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ASIC Benchmarks

ASIC has developed seven disclosure benchmarks for over-the-counter contracts for difference (OTC CFDs) to assist retail investors understand the risks associated with these products, assess their potential benefits and decide whether investment in the products is suitable for them.

As an issuer of OTC CFDs AxiTrader provides the information set out below to explain whether and how it addresses the benchmarks.

These disclosures are a summary only and should not be relied upon solely. The Product Disclosure Statement (PDS) sets out the information in detail and is available on this website. Clients should ensure they review the PDS in full before deciding whether to acquire AxiTrader’s products.

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.

Further explanation of this criteria is set out below.

  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 FX 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)

  1. 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.

  1. 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.

Updated 20 March 2019

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).
  • To accommodate flexible payment alternatives available to clients, AxiTrader allows opening collateral initial funding payments in excess of the $1000 benchmark prescribed by ASIC.

Updated 20 March 2019

Benchmark 3: Counterparty risk (Hedging)

Within AxiTrader’s risk management framework we have assessed the market risk and counterparty risks arising from entering into OTC CFD transactions with customers and hedge counterparties and applied controls to mitigate those risks. Those controls include:

  • the enforcement of leverage limits based on the account equity of the client and the instruments being traded;
  • the enforcement of market risk limits on the net exposure and daily loss limits of AxiTrader;
  • the selection of hedge counterparties, in sufficient number to give reasonable assurance that AxiTrader has adequate facilities and capacity to hedge its exposures; and
  • the selection and maintenance of hedge counterparty relationships based on, amongst other things, their financial capacity and resilience.

AxiTrader’s selection of hedge counterparties is based on the following factors:

  • whether the funds placed by AxiTrader as collateral are subject to Segregation;
  • the counterparties’ financial strength and stability based on its credit rating and that of its parent (if any);
  • the regulatory status of the counterparties and whether they are Australian Authorised Deposit-taking Institutions (ADIs); and
  • the services it provides and the strength of its operational controls and systems.

AxiTrader’s hedge counterparties at the time of publication are:

  • BNP Paribas
  • Royal Bank of Scotland
  • Goldman Sachs
  • Jeffries
  • INTL FC Stone Inc.
  • Invast Securities
  • Bell Potter
  • Sucden Financial Limited
  • Trade Tech Alpha
  • IG Markets
  • Gain Capital
  • CMC Markets
  • CFH Clearing
  • Liquid Digital Markets

Clients are indirectly exposed to counterparty risks notwithstanding these protections and should review the disclosures in the risk warning section of AxiTrader’s Product Disclosure Statement.

Updated 20 March 2019

Benchmark 4: Counterparty Risk (Financial resources)

AxiTrader maintains a written policy and procedure with regard to the management and ongoing monitoring of its financial resources. This written policy addresses the following matters, amongst other things:

  • the methodology employed by AxiTrader to measure and assess its regulatory financial requirements under its Australian Financial Services License;
  • linkages between the budgetary planning process and the financial requirements;
  • scenarios used to forecast the cash resources available to AxiTrader to meet its financial requirements; and
  • roles and responsibilities for measuring and monitoring the financial condition against the requirements.

We do not perform regular testing of our financial needs under stressed conditions due to the fact that exposures are subject to significant variation and the results generated at any point in time may not be applicable to our financial position at other points in time. To mitigate the risks of failing to satisfy the financial requirements, we have established a capital buffer based upon historical market moves and measure and monitor capital daily. Financial resources are also subject to external audit on an annual basis.

Updated 20 March 2019

Benchmark 5: Client Money

This information is made available by AxiTrader to explain how client money is handled. The purpose is to provide clients with an insight into how client money is segregated and may be utilised by AxiTrader so that clients are better informed to assess the safety of their funds.

Client money is held with Australian Authorised Deposit-taking Institutions (ADIs) in compliance with the Corporations Act Regulations. AxiTrader currently holds client segregated trust accounts with National Australia Bank Limited.

Funds are not held in individual segregated accounts but are pooled with other client’s funds. AxiTrader maintains client segregated trust accounts in a number of currencies for this purpose.

Funds held in trust on behalf of a retail client may only be withdrawn by AxiTrader as permitted under the Australian Client Money Rules, as set out in the Product Disclosure Statement and Client Agreement.

Funds held in trust on behalf of a wholesale client may be used by AxiTrader to meet its obligations incurred in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives, including dealings on behalf of other clients.

A daily and a monthly reconciliation of client funds held in client segregated trust accounts is performed. On the basis of which AxiTrader either pays to or withdraws money from the segregated trust accounts reflecting the net settlement of all obligations to its clients.

We are solely entitled to any interest or earnings derived from Client Money being deposited in a trust account or invested by us in accordance with the Australian Client Money Rules, with such interest or earnings being payable to us from the relevant trust account or investment account.

Updated 20 March 2019

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)

Updated 20 March 2019

Benchmark 7: Margin Calls

AxiTrader establishes minimum margin requirements for all instruments. These margin requirements are set out in the Product Schedule available on the website.

The MT4 trading system monitors the margin requirements of all open positions for each client against the client’s account equity. Clients can monitor their margin requirements and the margin ratio within the MT4 trading application.

Where account equity falls below the total margin requirement a margin call is generated and a notification is sent to the email address provided by the client to AxiTrader. Clients are advised that it is their responsibility to ensure they maintain sufficient equity to meet the total margin requirement at all times. AxiTrader is under no obligation to allow time for clients to forward funds to meet margin calls as markets can be volatile and AxiTrader may without notice, in its discretion, close out all or some positions if the margin requirements are not satisfied.. Clients must ensure that they monitor their margin requirements as AxiTrader cannot guarantee that margin call notifications will be received by clients so clients should not rely on this.

If a client’s free equity falls below the Liquidation Level AxiTrader is entitled, but not obligated, to close all open positions. We do not guarantee that positions will be closed and clients are warned not to rely on AxiTrader to do so. We also cannot guarantee that if positions are closed by AxiTrader that a deficit on the account will be avoided. Clients must be aware that they remain liable for any debit balance arising on their account.

The Liquidation Level is currently 20% but is subject to change.

If AxiTrader does close positions then the position with the largest margin requirement will be closed first and then subsequently in descending order until the margin ratio is above the Liquidation Level.

Updated 20 March 2019