The Australian Financial Market Regulatory Authority has revoked the retail forex and CFDs trading license of issuer XTrade.AU Pty Ltd, trading as XTrade, over a range of lapses.
ASIC revokes XTrade's license
Announced today (Thursday), the broker has also moved to the Administrative Appeals Tribunal (AAT) on 29 April 2024 to review and stay the Australian Securities and Investments Commission (ASIC) decision to revoke its Australian Financial Services (AFS) licence. However, the AAT refused to grant a stay order, meaning the license will remain revoked until a final decision is made.
XTrade operates as a retail over-the-counter (OTC) derivatives issuer, offering CFDs and FX contracts to its clients. CFDs provide leveraged trading opportunities, allowing traders to speculate on the change in the value of the underlying asset.
Although it will not be able to provide services in Australia with the canceled AFS licence, the brand will continue to operate in overseas markets with its licenses from Belize and South Africa.
Serious operational violations
According to the Australian regulator, between June 2018 and September 2022, XTrade failed to comply with its general AFS license holder obligations. The broker was engaged in “unreasonable behaviour”.
The regulator also noted that XTrade failed “to take reasonable steps to ensure that its representatives comply with financial services laws” and “did not have adequate arrangements to manage conflicts of interest.” In addition, the broker did not ensure that its “distribution of retail products was consistent with its target market identification” or that its services were provided “competently, honestly and with integrity.”
Aside from the operational lapses, the regulatory investigation found that the broker “placed its own interests above those of its clients and did not act in good faith.” Furthermore, mediation representatives have been engaging in misconduct for many years, and have failed to ensure they undergo proper training.
ASIC has been very strict with CFD brokers recently, especially regarding their services to retail traders. The broker has already introduced severe restrictions to the industry, reducing the offer leverage to as low as 30:1.
The regulator has also issued interim stop orders for breaches of design and distribution obligations (DDOs) against several popular CFD brands, including TMGM, Saxo and Mitrade. eToro has been sued for DDO violations, the first action of its kind against the broker.
This article was written by Arnab Shomi at www.financemagnates.com.