The Australian financial market regulator has revoked the license of XTrade.AU Pty Ltd, which operates as XTrade, for various regulatory breaches concerning retail forex and contracts for differences (CFDs).
ASIC Board Cancels XTrade’s License With Immediate Effect
Today, the broker mentioned it has already appealed the case to the AAT on 29 April 2024 after requesting a review and suspension of ASIC’s decision to cancel the AFS license. Sadly, the AAT denied this request for a stay order, which means that the license remained inactive until the disposal of this case.
While XTrade offered OTC derivative retail operating services, it provided customers with dangerous CFDs and FX contracts. CFDs offer leveraged trading opportunities that allow trading to make a forecast on shifts in the price of an asset.
XTrade was an over-the-counter (OTC) retail issuer of risky Contracts for Difference (CFDs) and FX contracts with customers. CFDs provide leveraged trading opportunities for an investment contract, which allows traders to trade with price fluctuations of an asset.
Severe Operational Violations in XTrade
As per the Australian regulator, from June 2018 to September 2022, XTrade did not adhere to the general obligations of an AFS license holder. The broker was involved in what was described as “unconscionable conduct.”
The regulator highlighted that XTrade did not ensure its representatives complied with financial services laws or managed conflicts of interest adequately. Additionally, the broker failed to align its retail product distribution with its target market determination and did not offer services efficiently, honestly, and fairly.
The regulatory investigation revealed that aside from operational deficiencies, the broker prioritized its interests over those of its clients and acted in bad faith. Additionally, the brokerage representatives were involved in misconduct for years, and the firm neglected to provide them with sufficient training.
ASIC has recently enforced strict regulations on CFD brokers, particularly about their services for retail traders. The broker has already implemented significant restrictions in the industry, reducing the maximum leverage to 30:1.
Regulator Puts a Temporary Stop Order
The regulatory body issued temporary stop orders for violations related to design and distribution obligations (DDOs) against various well-known CFD brands such as TMGM, Saxo, and Mitrade. Additionally, it took legal action against eToro for DDO violations, marking the first instance of such action against a broker.