What is ASIC? Why is it more reassuring to trade on a licensed exchange?

In-Depth Understanding of ASIC Licenses

ASIC is the abbreviation for the Australian Securities and Investment Commission. In Chinese, it is translated as the Australian Securities and Investment Commission. As an independent agency of the Australian government, ASIC is one of the most authoritative regulatory bodies in the global financial industry. Established in 1991, its main responsibilities include licensing, regulating, and overseeing financial service providers to ensure fair and transparent operation of financial markets.

In simple terms, an ASIC license is a certification of business operation obtained by global exchanges and financial institutions, indicating that the institution has passed rigorous review and complies with international financial regulatory standards.

The Authority and Regulatory Framework of ASIC

As an independent government agency operating under the Australian Securities and Investments Commission Act 2001, ASIC is not directly controlled by any government department. The agency operates under the supervision of the Minister of Finance and the Parliamentary Finance Committee. Its regulatory scope covers all major participants and activities within the Australian financial markets.

According to the ASIC Act, the core functions of the agency include:

▪ Continuous innovation and improvement of the operational efficiency of financial organizations

▪ Enhancing investors’ financial literacy and participation

▪ Establishing secure, efficient, and rapid information processing and protection mechanisms

▪ Providing timely relevant information and professional guidance

ASIC’s independent status and global influence make it an important standard for assessing the legitimacy of exchanges. Exchanges holding an ASIC license generally possess the fundamental elements required by investors and are trustworthy.

Core Conditions for Obtaining an ASIC License

Obtaining an ASIC license is not easy. Exchanges must meet a series of strict review criteria:

◆ Must establish a legitimate representative office in Australia

The exchange needs to set up a physical legal office in Australia to facilitate supervision by regulatory authorities.

◆ Obtain an AFSL(Australian Financial Services License)

This is a prerequisite for obtaining an ASIC license; the exchange must first acquire this license before proceeding with the application.

◆ Meet minimum capital requirements

Exchanges must maintain sufficient operating capital (starting from 1 AUD, including margin and working capital) to mitigate risks and prevent bankruptcy.

◆ Adopt advanced trading technology

Trading platforms must use modern trading software that aligns with their business models to ensure smooth trading and data security.

◆ Comply with AFS member rules

Strictly adhere to all regulations and guidelines of the Australian Financial Services(AFS) Committee.

◆ Implement an account segregation system

Investor funds must be fully separated from the company’s own funds to protect investors’ principal.

How to Verify an Exchange’s ASIC License

Due to the high recognition of ASIC licenses, some unscrupulous exchanges may forge certificates to deceive investors. Before investing, you need to verify the license through the following steps:

Step 1 - Visit the official ASIC website

Access the official ASIC query platform, ensuring the link comes from an official source.

Step 2 - Use the search function

Find the “Search Within” option and select the “Organisation & Business Names” category.

Step 3 - Enter the exchange name

Accurately input the name of the exchange you wish to verify in the search box and click the “Go” button.

Step 4 - Confirm company information

Find the corresponding company name from the search results.

Step 5 - Compare information

Compare the information from the ASIC database with the information provided by the exchange to ensure they match exactly.

Is Trading on an ASIC-licensed Exchange Really Safe?

Based on the strict licensing conditions outlined above, you can understand why only the most professional exchanges can obtain an ASIC license. This not only reflects the complexity of the review process but also indicates that licensed exchanges have a very high level of credibility.

Trading on an ASIC-licensed exchange is safer mainly because:

✅ Financial Transparency Assurance - Exchanges are required to regularly disclose and update financial information, ensuring operational transparency and clarity.

✅ Fund Security Mechanism - ASIC mandates exchanges to establish strict fund management systems to ensure that user deposits are properly protected.

✅ Robust Technical Infrastructure - Exchanges under ASIC regulation possess sufficient capital and advanced technical systems capable of handling large-scale transactions.

✅ Fair Dispute Resolution Mechanism - ASIC has established transparent and fair complaint handling processes to evaluate and mediate disputes between exchanges and investors.

✅ Strict Operational Standards - Although demanding, these standards ensure the authenticity and reliability of the exchange’s compliance and security.

These protective mechanisms create a relatively safe trading environment for investors, allowing them to confidently choose exchanges holding an ASIC license for their investments.

Other International Financial License Standards

Besides ASIC, there are other highly recognized financial license standards worldwide, all comparable in quality to ASIC:

CySEC(Cyprus Securities and Exchange Commission)

Established in 2001, headquartered in Cyprus, overseeing securities companies and intermediaries. The minimum capital requirement is 125,000 euros(STP model) or 730,000 euros(Market Maker model).

FCA(Financial Conduct Authority (UK))

Headquartered in the UK, it is one of the strictest financial regulators globally, supervising over 56,000 organizations. The minimum capital requirement for Forex agents is 730,000 GBP, and for intermediaries, it is 125,000 GBP or 50,000 GBP.

FSAS(Seychelles Financial Services Authority)

Focused on providing tax-efficient financial services, mainly responsible for supervising international company registration and investment activities, ensuring market stability.

Exchanges holding any of the above licenses demonstrate compliance with international regulatory standards. Investors can refer to these licenses to evaluate the legitimacy and safety of exchanges.