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Market supervision update — Issue 15, October 2011

Previous issues

ASIC to consult on broader market structure

ASIC is finalising a consultation paper on issues arising from recent developments in Australia's financial markets.

In particular, the consultation paper will seek views on proposed market integrity rules relating to:

ASIC's market surveillance duties have expanded since the transfer of supervisory powers on 1 August 2010, and will expand further once competition commences. ASIC aims to implement a regulatory approach that will keep pace with market and international developments.

Interested parties will be invited to make submissions on how to best achieve this regulatory outcome.

The consultation paper will contain details on how interested parties can make submissions. We look forward to the industry's contribution to this process.

Application of Chi-X and Competition Market Integrity Rules

As market participants are admitted as participants of the new Chi-X market, they should be aware that once the new market opens, they will immediately need to be in compliance with the ASIC Market Integrity Rules (Chi-X Australia Market) 2011 (Chi-X MIRs) and the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011 (Competition MIRs).

In addition, market participants should consider ahead of the 'go-live' date, whether they have taken necessary steps to ensure compliance in relation to certain areas, for example, management plans and responsible executives. These and other areas have been raised and discussed at the regular Participant Readiness 1-on-1 meetings that have been held to date.

If market participants have any concerns in relation to their ability to comply with any or all of the Chi-X or Competition MIRs, they are encouraged to contact their participant relationship manager for further assistance.

Markets Disciplinary Panel: Disciplinary matters

ASIC recently announced that Patersons Securities Ltd (Patersons) had paid a penalty of $25,000 and provided training to its Designated Trading Representatives in order to comply with an infringement notice given to it by the Markets Disciplinary Panel (MDP).

The MDP is a peer review body that exercises ASIC's power to issue infringement notices and accept enforceable undertakings in relation to alleged breaches of the market integrity rules. The market integrity rules are made by ASIC and apply to market operators, market participants and prescribed entities under the regulations.

The notice was in relation to conduct by Patersons in February 2011, which is alleged to have contravened market integrity rule 6.6.1 of the ASIC Market Integrity Rules (ASX Market). The rule provides that 'a trading participant must not effect a Special Crossing of any Cash Market Products (excluding Warrants) of an Issuer, on behalf of that Issuer during the term of a buy-back offer conducted On-Market by that Issuer'.

On 17 February, Patersons effected a Special Crossing on behalf of the issuer of CFE (Cape Lambert Resources Limited). CFE is a cash market product, and the Special Crossing was effected as part of a buy-back of CFE which was being conducted on-market by Cape Lambert. Patersons elected to not contest the alleged breach. More information in relation to this matter, including the factors considered by the MDP in determining the penalty and the remedy to be applied, can be found on the ASIC website.

Security for online broking accounts

ASIC recently attended a meeting of the Intermarket Surveillance Group (ISG). One of the discussions related to a scam where computers infected with keystroke trapping viruses that capture login details for broking accounts. The accounts are then used to make unprofitable trades, with – we assume - the perpetrators making money on the other side.

While investigations are on foot in several jurisdictions in Europe and North America, ASIC recommends that participants review their account security. At least one overseas participant has already introduced an alert that looks for what they consider 'destructive trading' by clients.

We encourage participants to contact ASIC should they come across any similar types of activity in Australia.

Potential request for tender (RFT): stockbroking services

ASIC is currently considering releasing a Request for Tender (RFT) for the provision of stockbroking services, in particular to support its work in the unclaimed money area and when required to administer shares vested in ASIC or the Commonwealth (e.g. through operation of the law or by order).

If an RFT is progressed, relevant documents will be released on the AusTender website, the Australian Government's procurement information system. Interested parties can visit the website to find out more information about such procurement processes, including how to become aware the RFT has been released. Until that point, ASIC cannot provide further information, and interested parties will need to await the RFT for specific details.

Contact ASIC

Market participants should contact ASIC for market integrity issues and ASX for operational issues. Contact ASIC’s Market and Participant Supervision group on 1300 029 454 and you will have these voice menu options:

Or you can reach the Market and Participant Team by email market.participants@asic.gov.au, or through your relationship manager.

For more information

Please see www.asic.gov.au/market-supervision.



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ASIC's Market supervision update is a periodic eNewsletter from the Australian Securities & Investments Commission, 100 Market Street, Sydney, NSW, Australia, 2000. You are receiving this because you asked to be put on the mailing list.


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