Equity Mini-Derivatives and the Future of On-Line Investing: An Australian Regulatory Perspective

Posted: 21 Jun 2002

See all articles by Paul Ali

Paul Ali

University of Melbourne - Law School

Abstract

This article discusses the legal design and regulatory status under Australian law of the low-value equity derivatives available to retail investors over the internet. These "equity mini-derivatives" comprise equity contracts for differences (which are structured in a similar manner to retail margin lending products), equity spread bets and fixed odds equity bets (both of which are modelled on conventional sports bets).

The article examines the three regulatory issues confronting the parties to equity mini-derivatives in Australia, namely (1) are equity mini-derivatives offered on-line "financial products" for the purposes of the Financial Services Reform Act 2001 (which came into force in Australia on 11 March 2002)? Consequently, will the contracting parties be taken to be dealing in financial products or making a market for such products and therefore subject to the licensing provisions of the Act? (2) do equity mini-derivatives contravene the strictures imposed by Australian law on gaming and wagering contracts? (3) do the on-line trading facilities for equity mini-derivatives contravene the strictures imposed by Australian law on internet gambling?

Keywords: Equity Derivatives, Mini-Derivatives, Equity Bets, On-line Investing, Internet Gambling

JEL Classification: G18, K22

Suggested Citation

Ali, Paul, Equity Mini-Derivatives and the Future of On-Line Investing: An Australian Regulatory Perspective. European Business Organization Law Review, Vol. 3, 2002. Available at SSRN: https://ssrn.com/abstract=305741

Paul Ali (Contact Author)

University of Melbourne - Law School ( email )

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