ASIC has taken decisive action by revoking the Australian financial services (AFS) license of XTrade AU Pty Ltd (XTrade), a retail over-the-counter (OTC) derivatives issuer. This decision follows an extensive investigation revealing serious breaches by XTrade from June 2018 to September 2022.

XTrade facilitated trading in contracts for difference (CFDs) and foreign exchange contracts (FX contracts), targeting vulnerable clients who lacked sufficient trading experience or financial capacity. ASIC found that XTrade engaged in unconscionable conduct, failed to ensure compliance with financial laws by its representatives, neglected conflict of interest management, and did not appropriately distribute products according to their target market determination.

ASIC Takes Action by Revoking XTrade AFS License

Furthermore, ASIC discovered that XTrade prioritized its own interests over client welfare, demonstrating a lack of good faith and falling short of expected standards for an AFS licensee. The regulator also highlighted XTrade’s failure to prevent representative misconduct and inadequate training practices over many years.

In response to ASIC’s cancellation of its AFS license, XTrade appealed to the Administrative Appeals Tribunal (AAT) on April 29, 2024. However, following an interlocutory hearing on May 31, 2024, the AAT denied XTrade’s application for a stay, thereby upholding ASIC’s decision pending a final ruling on the substantive review.

XTrade has held AFS license 343628 since April 12, 2010, and operates as part of the international XTrade Group, which includes entities such as the XTrade online brokerage based offshore in Belize and operated through a South African subsidiary.

ASIC’s enforcement actions against XTrade are part of broader efforts to address misconduct within the retail OTC derivatives sector. Recent actions include substantial penalties against other firms and enhanced regulatory measures to protect retail clients from high-risk OTC derivative products. These measures include a product intervention order on CFDs and enforcement of design and distribution obligations to ensure consumer protection.

ASIC’s actions show its commitment to maintaining integrity and fairness in Australia’s financial markets, particularly concerning products that pose significant risks to retail investors.

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