The Australian Securities and Investments Commission (ASIC) has made an interim stop order preventing Stratos Trading Pty Limited, trading as FXCM, from issuing CFDs to retail clients because of deficiencies in its target market determination (TMD).

ASIC acted because it was concerned that the TMD inappropriately included investors with a medium risk appetite in the target market for FXCM’s CFDs.

The regulator explains that the risks associated with trading FXCM’s CFDs, including leverage, volatility, liquidity and pricing risk, make them unlikely to be suitable for investors who have a ‘medium risk appetite’, regardless of any other investment criteria noted in the TMD.

The interim stop order prohibits FXCM from issuing CFDs to retail clients and opening trading accounts for new retail clients to trade in those CFDs. It covers CFDs issued by FXCM that reference the following underling asset classes:

• currency pairs and Forex baskets
• treasuries and commodities
• stock indices
• stocks and stock baskets, and
• cryptocurrencies.

The regulator made the interim order to prevent FXCM from issuing CFDs to retail clients, where distribution of the products is unlikely to be consistent with the financial objectives, situation or needs of consumers in its target market.

The order does not prevent FXCM’s existing clients from varying or closing their CFD positions.

The order is valid for 21 days unless revoked earlier.