Important information for international trading clients

When the markets are volatile, understanding the differences between investing domestically and internationally is crucial. Below you will find further information on the risks associated with investing in offshore markets.

The Australian market is highly regulated. And while the overseas markets that CommSec allows trading in are regulated too, it’s important to note that each market is regulated in a different manner with a different set of rules. 

Domestically, the Australian Securities & Investments Commission (ASIC) supervises real-time trading on Australian markets. ASIC ensures that market operators and participants (such as CommSec) adhere to ‘Market Integrity Rules’, which aim to keep markets operating in an orderly and fair manner.

When trading conditions deviate from normal, such as when the trading price of a security increases above or decreases below a certain threshold, the ASIC Market Integrity Rules incentivise intervention from securities exchanges such as the Australian Securities Exchange (ASX) and Cboe Australia (Cboe). In such instances, these exchanges may apply a ‘trading halt’ (the halt of trading in a particular security), to stay in place until such time that conditions return to normal i.e. acceptable parameters. 

In overseas markets however, regulators that govern these jurisdictions have different standards/powers when it comes to intervening, specifically the intervention when trading conditions deviate from the norm. This means that when there is increased market volatility and fluctuation in share price, investors may be more exposed to larger losses.

• Currency risk – As international securities are denominated in a currency other than Australian dollars, the value of your investment may be affected by changes in currency exchange rates.
• Political and regulatory risk – International shares are held by an international custodian, and are subject to risks relating to political, economic and regulatory changes in the country of the custodian or stock exchange.
• Taxation risk – Taxation implications can be different from investing in Australian securities and may vary depending on your individual circumstances.

Leverage in options trading can multiply your losses (if the market moves against you) as well as multiply your profits (if the market moves in your favour).

In periods of high market volatility, the market can move against your trading strategy quickly, resulting in substantial financial losses. In some cases, you can lose more than the amount you have put in. Examples of these scenarios include; the underlying security moving against you resulting in total or substantial loss of premium paid or losses incurred following the exercise or assignment of your option.

It is important to actively monitor your options portfolio and the market, particularly during periods of high market volatility.

• If the market moves against you, you can take action early to reduce your exposure by closing out your options positions.
• You can stay on top of the markets with up to date stock prices and trends, by making sure you regularly access the Quotes section on the CommSec website and within the international trading platform.

While it might be tempting to react to news or hype around a particular security in order to ‘make a quick buck’, you should also ensure your investments are aligned to your goals and strategy.  It’s a good idea to always exercise your independent judgement before making an investment decision and understand that a trading strategy that works for someone else may not necessarily work for you.

You can find further information on the risks of investing in international markets in the Risk Disclosure Statement.  Or, to discuss further with a member of our team, please contact our International Trading Desk on 1300 361 170 or +61 2 9115 1531 (from outside Australia), 24 hours a day on US trading days.   As we are currently experiencing high call volumes, you can also email commsecinternationaldesk@cba.com.au