Regulatory Benchmark

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

As a provider of OTC CFDs, we provide the below information to explain whether and how we meet and address the benchmarks.

Please note that it is a summary only and should not be relied upon solely. You should refer to our PDS which sets out the information in more detailed before deciding whether investment in the aforesaid products is suitable for you.

Benchmark 1 | Client Qualification

To ensure compliance with the Australian Anti-Money Laundering and Counter Terrorism Financial Act 2006 and ASIC Regulatory Guide 227, we maintain and apply a Client Qualification Policy to ensure all prospective clients have appropriate experience in, or knowledge and understanding in derivative products.

First, we require applicants to satisfy one of the following criteria:
1.   Demonstrate that they have previous trading experience in the same or similar products; or
2.   Pass our online qualification test with a score of 70% or greater.

If applicants cannot satisfy one of the aforementioned criteria, then they will not be considered qualified to be a client of EightCap.

Further, we are also required to identify the identity of our clients before we can set up any trading account and therefore require applicants to provide us with certain identification documents.

Benchmark 2 | Opening Collateral

We only accept cleared funds from clients as collateral to open a trading account.

These cannot be cash equivalents (e.g. no securities as deposits) and can only be electronic funds transfer from client’s bank account or through credit card payment.

We also comply with ASIC’s suggested benchmark on opening collateral requirements and apply a maximum amount of $1,000 for initial funding if payments are made by credit card.

Benchmark 3 | Counterparty Risk (Hedging)

We have a formal Counterparty and Hedging Policy that is maintained and updated regularly.

We have assessed the market risk and counterparty risks arising from entering into transactions with customers and hedging counter-parties and applied controls to mitigate those risks.

Generally, we may not hedge a client’s position or post the trade straight through (known as straight through processing or STP) and instead set the prices at which we are prepared to deal with the client. In some cases, client trades are hedged by passing the equivalent volume of instrument traded through to a Liquidity Partner (LP), thereby mitigating client’s risk resulting from adverse market movements.

We also conduct regular surveillance of our client-to-liquidity-provider exposure to ensure any discrepancies that may arise are corrected as appropriate. This may from time to time involve bulk purchases of a given currency or index with an LP which are generally infrequent and immaterial in size.

Benchmark 4 | Counterparty Risk (Financial Resources)

We maintain and follow a written policy and procedure to ensure we meet all financial regulatory obligations including the requirements of an Australian Financial Services Licensee.

To mitigate the risks of failing to satisfy the financial requirements under our license and to provide assurance that we have sufficient financial resources at all times, we:
–   have established an internal requirement to maintain a capital buffer over and above the external regulatory requirement;
–   measure and monitor the internal buffer and the external financial requirements against our actual financial condition on a daily basis; and
–   subject our financial condition to quarterly scenario tests to assess compliance with the regulatory capital requirements and our ongoing financial needs under stressed conditions.

In addition, we have a dedicated Compliance Officer who monitors our compliance with our licence conditions and ASIC RG 166 (financial) obligations. We also employ independent, external legal and accounting advisers who ensure we meet ASIC requirements and conduct an audit at the end of each financial year.

Benchmark 5 | Client Money

We have a detailed and clear policy regarding the use and handling of client money. We ensure that we follow and comply with the Australian Client Money Handling Rules and employ strict policies and procedures regarding the maintenance and operation of these accounts.

Funds received from clients are deposited into segregated bank accounts with Australian Authorised Deposit-taking Institutions (ADIs) and are held separately from business operating funds. We currently hold segregated client trust accounts with the AA-rated National Australia Bank (NAB).

Please note that we do not use client money for any business purpose – it is solely used for the purpose of maintaining margin that is needed to cover positions opened by clients only.

Benchmark 6 | Suspended or Halted Underlying Assets

We do not allow new positions to be opened when the underlying market is halted or suspended.

We may, in our absolute discretion, cancel client’s order in respect of a Margin FX or CFD transaction which has not yet been opened, or close any open positions where the underlying financial product is the subject of a trading halt, suspension or delisting.

Benchmark 7 | Margin Calls

We operate a written policy in relation to margin call practices and close outs.

Generally speaking, all open positions are monitored on a real-time basis, intraday, 5 days per week to ensure changing margin requirements are identified in a timely manner. Further, all margin calls will be communicated to clients via email and/or the online trading platform.

Please note that while this automated margin call process acts as a protection for both client and provider, market volatility, particularly surrounding news events, may result in additional losses. It is your obligation to ensure you are always available to receive and action such margin calls – we cannot guarantee that margin call emails will be received and reserve the full rights to close out your positions when margin calls have not been met in order to protect against exposure to further losses.

Head Office:
Level 11, 356 Collins Street
Melbourne, VIC
3000 Australia

Risk Warning: Margin trading involves a high level of risk, and may not be suitable for all investors. You should carefully consider your objectives, financial situation, needs and level of experience before entering into any margined transactions with EightCap, and seek independent advice if necessary. Forex and CFDs are highly leveraged products which mean both gains and losses are magnified. You should only trade in these products if you fully understand the risks involved and can afford losses without adversely affecting your lifestyle (including the risk of losing substantially more than your initial investment). A Product Disclosure Statement (PDS) and a Financial Services Guide (FSG) for our products are available to download from our Legal Documentation page. You must assess and consider them carefully before making any decision about using our products or services.

EightCap is a registered business name of EightCap Pty Ltd (ABN 73 139 495 944). We are regulated by the Australian Securities & Investments Commission (ASIC) - our AFSL number is 391441. This licence authorises us to provide financial services to people in Australia.

The information on this website is of a general nature only and is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. EightCap is not a financial adviser, and does not issue advice, recommendations, or opinion in relation to acquiring, holding or disposing of a margined transaction. We provide general advice only and accordingly you should consider how appropriate the advice (if any) is to your objectives, financial situation and needs before acting on the advice.