Australia’s robust yet flexible regulatory framework makes it an appealing destination for investment, attracting many prestigious brokers. A vast range of trading instruments are available to investors here, but Forex brokers registered in Australia must adhere to strict regulations.

Milestones in development of a national regulatory Forex framework

  • 1990s: the nation's ASIC commission closely oversees brokers serving Australian traders and has regulated financial markets as a traditional overseer.
  • 2001: the Corporations Act ensures laws are interpreted properly within the government’s framework for market integrity.
  • 2009: ASIC underwent major shifts in its approach, implementing reforms aligned with global best practices for companies on the Australian Stock Exchange. ASIC mandates that all Forex brokers obtain a valid Australian licence (AFSL) to operate, binding them directly to ASIC rules.

At present, ASIC reviews and decides on applications for Forex company licences. It issues these licences to financial firms seeking to conduct Forex trading, provided they satisfy certain criteria.

Within its broad scope, ASIC grants licenses once applications meet its approval, oversees financial institutions’ activities, and ensures they follow established regulations. Specifically, ASIC’s authority extends across:

  • Provision of financial services
  • Insurance
  • Stock exchanges and Forex trading
  • Other financial activities

Prerequisites for an ASIC Forex broker licence

To qualify for operating as a Forex broker in Australia, applicants must meet several prerequisites including eligibility, capital adequacy tests to demonstrate financial position, and more.

ASIC maintains extensive regulations designed to deter financial misconduct or exploitation. It routinely monitors regulated participants for compliance and swiftly investigates alleged breaches.

To promote consistency, ASIC has instituted a consolidated framework that guides member firms in applying core regulatory rules. By adopting global standards, ASIC now requires Forex brokers to hold min. working capital of AUD$1 million. Those seeking an Australian forex licence must also keep client funds in segregated Tier 1 bank accounts, inaccessible for business purposes. Additionally, ASIC offers an investor compensation scheme to protect client assets in case of a broker’s insolvency.

ASIC publishes a list of all licensed, compliant brokers. It also handles trader complaints against brokers, launching investigations and potential penalties for mishandling.

The Australian authority APRA provides further oversight, regulating banks and insurers.

Updated (lowered) leverage limits for nation’s traders:

  • 20:1 for currency and gold/silver
  • 2:1 for cryptocurrency
  • 10:1 for crude oil and natural gas
  • 15:1 for indices
  • 5:1 for shares

These limits protect novice traders from substantial losses. Likewise, regulator has strongly prohibited options trading to retail investors.

Obtaining Forex licence

Australian AFSL licence authorises holders and representatives to provide financial services to clients. Entities requiring a brokerage licence in Australia include those intending to:

  1. Advise on financial products
  2. Trade or create markets for financial products
  3. Provide custodial, depositary, or traditional trust services
  4. Offer crowdfunding platforms

ASIC evaluates AFSL applications by assessing aspects such as:

  • Competence to supply proposed services
  • Adequate financial resources to conduct business
  • Sufficient risk management frameworks
  • Capacity to meet other AFSL obligations

AFSL: How to obtain

Applicants must submit Form FS01 and key supporting documents. Before applying, they should review core prerequisites.

When selecting licence permissions, applicants should only choose those immediately necessary, rather than speculative future needs. As business activities evolve, licence holders must apply to amend permissions accordingly.

Specific requirements for forex brokers include:

  • Demonstrating solvency
  • Qualified, experienced management
  • Compliance with all applicable standards
  • Adequate technological and human resourcing
  • Full transparency around beneficial ownership
  • Details regarding authorised share capital
  • Documented business strategy
  • At least two Australian citizen managers monitoring legal compliance
  • One shareholder with local forex experience
  • Professional indemnity insurance
  • Registered Australian office
  • Appointed auditor within one month of approval

AFSL approval timeframes depend chiefly on the completeness of submissions and applicant responsiveness to ASIC queries.

Leverage limits vary based on traders’ records, assets, and experience. ASIC-regulated brokers must file periodic audit reports, provide full financial transparency, offer high-performance trading platforms, and prioritise effective complaint resolution. Through such standards, ASIC aims to reduce market risks and protect trader interests.

AFSL applicants may include individuals, partnerships, companies, trustees, or other legal entities. While trusts themselves cannot own an AFSL, trustees can apply on their behalf.

Parties interested in obtaining an Australian forex broker licence should contact TKDeal staff for further guidance. We also offer support services to establish a business and open a corporate bank account in Australia if required.