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Full question: I am looking to start a new FX/CFD brokerage but don’t yet have an AFSL and wondering whether you know of any licence holders which may allow use of their licence. Alternatively, is there any way I can apply myself for a licence although I have not worked for an AFSL business?
Answer: You’ll need to gain regulated experience in market making, advising and dealing (issuing) in derivatives and FX for at least 3 years before running your own Margin FX/CFDs AFSL. Alternatively, you’d need to employ others with those skills. What I’m talking about here are Responsible Managers (RMs).
Whilst you can become an authorised representative (AR) of another licensee for that period, you won’t gain regulated AFSL experience in issuing or market making as an AR. This is because an AR acts on behalf of the licensee, and market making and issuing are mostly principal-only activities.
You can work for a fully licenced CFDs AFSL for at least 3 years to gain the requisite experience. You’ll also need to recruit others with that experience too, as ASIC expects a couple of RMs for CFDs applications, given the risks associated with that type of business, and the nature of the markets being traded. For example, crypto markets are 24/7.
We are the only firm (to our knowledge) that has helped a client obtain a CFDs licence in the last few years, and we are helping a few very established businesses obtain those licences presently. You’d need a healthy budget to set up here in Australia, to account for the $1.1m NTA obligation, insurance, RM salaries, audit, etc.
The next step from here is normally a strategic discussion about next steps, pros and cons of various structures, and related matters.
Author: Paul Derham (Partner), Holley Nethercote Commercial & Financial Services Lawyers
