Equity market structure review
Timetable for introduction of competition
On 3 March 2011, we released a timetable for the introduction of market competition, which included a summary of the intended market integrity rules.
Read the advisory announcing our timetable for the introduction of market competition
Market changes limited for the commencement of competition
New market integrity rules for competition in exchange markets
On 29 April 2011, ASIC released new market integrity rules for competition in exchange markets. These rules are intended to mitigate the regulatory issues resulting from the introduction of competition in exchange markets for trading in equity market products.
ASIC has only implemented those market integrity rules that are necessary for competition at this time. The market integrity rules for competition in exchange markets include:
- requirements for market operator level order entry controls and a harmonised trade cancellation policy in the event of an extreme price movement
- rules on achieving best execution for clients
- pre-trade and post-trade transparency rules to promote the fairness and efficiency of our market and in particular to promote its liquidity and quality of price formation
- reporting requirements for crossing systems
- rules on making market data available and promoting accessibility of consolidated market data
- information sharing requirements between market operators
- rules on the coordination of time, identifiers and tick sizes across markets
- a requirement that all transactions in equity market products are entered into under the rules of a licensed market (unless the transaction is a redemption or primary market action)
- rules prohibiting trading during a trading halt; and
- rules to allow market participants to aggregate transactions into a single confirmation.
These rules supplement existing ASIC Market Integrity Rules (ASX Market) 2010 and ASIC Market Integrity Rules (Chi-X Market) 2011.
Read:
the advisory, April 2011
copies of the market integrity rules and related regulatory guidance
FAQs - Competition market integrity rules and implementation issues, July 2011
Regulatory Guide 223 Guidance on ASIC market integrity rules for competition in exchange markets (RG 223) provides background to the market integrity rules, outlines our expectations about how market operators and participants should comply with the new market integrity rules and provides practical good guidance recommendations for data consolidators and in relation to the more complex rules, such as best execution.
Download RG 223
The majority of the market integrity rules for competition in exchange markets commence on 31 October 2011. A small number of the market integrity rules for competition in exchange markets apply shortly after the market integrity rules are registered. They relate to the provision of information to ASIC about activity on crossing systems (that is, dark pools) to assist our market analysis and the provision of order and trade information to enable ASX, Chi-X and the industry to prepare for competition. The market integrity rules also provide transitional arrangements for some requirements, such as best execution.
Consultation and submissions
On 4 November 2010, ASIC released a consultation package on enhancing the regulation of Australia’s equity markets, including proposals to address risks associated with the introduction of competition between exchange markets and from recent market developments.
Read the advisory about the 2010 release
The consultation package included:
- Consultation Paper 145 Australian equity market structure: Proposals (CP 145) which proposes market integrity rules to address some of the regulatory issues arising from market developments and the additional regulatory issues resulting from the introduction of competition
Download CP 145
- Report 215 Australian equity market structure (REP 215) which looks at recent and likely trends in global and Australian equity markets, including the lessons from other jurisdictions that have introduced competition between market operators.
Download REP 215
Response to CP 145
Report 237 Response to submissions on Consultation Paper 145 Australian equity market structure: Proposal (REP 237) was issued on 29 April 2011. This report provides detailed information about the responses to CP 145 and outlines our response to the feedback.
Download REP 237
We received 20 non-confidential responses to CP 145.
View non-confidential submissions to CP 145
Further work to respond to wider market developments
In CP 145, we consulted on a number of proposed rules relating to broader market structure developments. We intend to use the benefit of the feedback from CP 145 to refine some of our proposals that respond to wider market developments (for example, relating to growth in non-pre-trade transparent pools of liquidity (dark pools) and the impact they are having on the public price formation process, automated electronic trading and volatility controls).
We intend as a matter of priority to consult further on these important issues and, subject to the outcomes of this consultation, aim to settle these additional rules in early 2012 (with sufficient lead time for transition and implementation).
The proposed additional market integrity rules relate to the following issues:
- enhanced controls for automated electronic trading, including for algorithms to be appropriately tested and a mechanism to immediately disable them if necessary
- enhanced controls for direct electronic access, including minimum client standards, a legally binding contract with clients and pre-trade controls
- volatility controls to automatically limit market activity during extreme market movements
- imposing requirements on market participants to demonstrate compliance with their best execution arrangements, including by publishing reports on order transmitting and imposing requirements on market operators to publish reports on execution quality
- enhanced data requirements for ASIC’s surveillance capability, such as the identification of categories of clients, origin of order and off-order book matching mechanisms; and
- exceptions to pre-trade transparency and mechanisms for promoting pre-trade transparency, particularly after further analysis of the impact of dark pools on price formation in the Australian marketplace. We also intend to review the post-trade transparency deferred publication regime.
We also intend to make market integrity rules on suspicious activity reporting and the mandatory identification of short sales as early as possible in 2011, as proposed in CP 145, with sufficient lead time for implementation.
More details will be provided in coming months.
See further ASIC consults on equity market structure issues, 11-225MR, 20 October 2011
Download related documents
Download a copy of:
ASIC consults on equity market structure issues, 11-225MR, 20 October 2011
ASIC consults on consequential market integrity rules for ASX and Chi-X markets, 11-176AD, 17 August 2011
FAQs - Competition market integrity rules and implementation issues, July 2011
ASIC consults on capital and related requirements for the ASX, ASX 24 and Chi-X markets, 11-113AD, 3 June 2011
ASIC publishes final competition market integrity rules, Media release 11-87MR, 29 April 2011
Background paper to 11-87MR 
including FAQ and summary of the package
Market integrity rules
Regulatory Guide 223 Guidance on ASIC market integrity rules for competition in exchange markets
Report 237 Response to submissions on Consultation Paper 145 Australian equity market structure: Proposals
Regulatory impact statement
ASIC consults on equity market structure regulatory framework, Media release 10-227MR, 4 November 2010
Australian equity market structure – Background (this document provides information relating to the consultation process in the form of questions and answers)
Overview of Consultation Paper 145 and Report 215 – Australian equity market structure (this document reproduces Part 1 of the consultation paper CP 145)
Consultation Paper 145 Australian equity market structure: Proposals
Report 215 Australian equity market structure
Australian equity market structure: draft market integrity rules
ASIC Website: Printed 02/23/2012
