Are you a wholesale client or a retail client?
In light of ASIC’s 2019 leverage cuts, can you continue to receive higher rates of leverage if you become a wholesale client?
Basic Distinction Between Wholesale And Retail Clients
Under the Corporations Act 2001 (the “Act”), an Australian citizen is always either a wholesale client or a retail client in relation to a financial product/ service.
The Act draws a distinction between the two to bolster protection for retail clients, who are considered (by law) as less “financially literate” than their counterparts (wholesale investors).
At the same time, the Act allows for some people to be classified as wholesale CFD clients. These clients are typically those with the skills, money and experience to invest/ trade in more complex products.
What Is a Wholesale (or Professional) Client?
Under the ‘Act‘, everyone starts off as a retail client until they satisfy at least one of the requirements to be re-classified as a wholesale client.
When it comes to CFD trading in Australia, you can be categorised as a wholesale investor if you meet one the of the following:
- Net assets of at least $2.5 million (i.e. home/ property, savings, superannuation, other assets), or
- Gross income of AUD $250k for each of the last two financial years.
What Are The Key Differences?
As retail clients are considered less financially literate than wholesale clients, the law requires that CFD brokers (and other financial institutions) meet a vast range of disclosure and conduct requirements when dealing with retail CFD clients.
Here are some of the obligations of a CFD broker:
- Retail clients MUST receive a Financial Services Guide (FSG) and a Product Disclosure Statement (PDS) from their CFD broker. Wholesale clients do not need to receive these documents.
- Retail customers enjoy consumer protections set out in the Future of Financial Advice reforms. Wholesale clients do not.
- Wholesale clients have access to a wider range of investments and products compared to retail clients.
In light of ASIC’s impending leverage restrictions (for retail clients), can you become a wholesale client to avoid the changes?
Yes, one way to avoid ASIC’s recent leverage restrictions that came into effect on 29 March 2021, is to become a wholesale CFD client.
Wholesale clients are not subjected to the same product intervention orders that ASIC have introduced (i.e. leverage cuts). Only retail clients are subject to the leverage restrictions. So if you were successful in your professional client application, you would continue to receive the current rates of leverage that are available.
To read more about ASIC’s leverage changes to the Australian CFD industry, please click here.
CFD Brokers That Can Offer Wholesale CFD Accounts:
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| Who are they? | Low-Cost CFD Broker | Fast-Growing CFD Broker | World-Leading CFD Broker |
| Leverage | 200:1 (Bahamas) | 30:1 | 30:1 |
| Current Regulation | ASIC, Bahamas | FCA, ASIC | FCA, ASIC, MAS |
| Min. Deposit | $0 | $100 | $100 |
| Segregated Bank Accounts? |  |
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| ASX Stock Commission | 0.07% with $5 min. | No ASX stocks | 0.08% with $5 min. |
| Australia 200 spread | 0.9pts – FIXED | 1pt | 1pt |
| Wall St 30 spread | 1pt – FIXED | From 1.6pts | 1.6pts |
| AUD/USD spread | 0.6 pips – FIXED | From 0.5 pips | From 0.5 pips |
| Spread Type | Fixed | Fixed & Variable | Variable |
| Trading Platform | CloudTrade | cTrader or MT4/ MT5 | Advantage Web |
| Next Steps | Read Review Open Account | Read Review Open Account | Read Review Open Account |
