This paper outlines some early observations by ASIC staff on trading in securities and contracts for difference (CFDs) during the volatility caused by the COVID-19 pandemic (COVID-19 volatility). It was produced to inform our work in managing the impact of the COVID-19 pandemic and is published to raise awareness and provide detail on recent retail investor trading activity and issues of concern.

The paper highlights a range of potential retail investor harms. It is divided into three parts:

(a) Section A sets out the changes we observed in retail trading activity in securities markets;

(b) Section B sets out the potential retail investor harm in securities markets; and

(c) Section C discusses CFDs and market volatility.

Examples in this paper are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements.

Time periods covered in this paper:

The securities market analysis in Sections A and B is derived from ASIC’s exchange market surveillance data, using trading through retail brokers. We use this as a proxy for retail investor activity, but we note that not all trading through these brokers is ‘retail’ within the context of the Corporations Act 2001 (Corporations Act). The ‘focus period’ is from 24 February 2020 (the first trading day after the market peak) to 3 April 2020, and the ‘benchmark period’ used for comparison is the six months prior (22 August 2019 to 21 February 2020). The CFD analysis in Section C is based on over-the-counter (OTC) derivatives trade repository data and separate data provided by a sample of 12 Australian licensed CFD providers for the seven days from 16 to 22 March 2020.