ASIC Market Supervision Update issue 14

Previous issues

Competition: readiness

ASIC has farewelled Commissioner Shane Tregillis, who has left ASIC and taken the role of Chief Ombudsman with the Financial Ombudsman Scheme. ASIC Deputy Chairman Belinda Gibson, who after overseeing the transfer of market supervision from ASX to ASIC in 2010, will now oversee the introduction of competition in Australia's financial markets.

The introduction of competition is in its advanced stages. ASIC has introduced a new regulatory framework to facilitate competition in market services, and new entrant Chi-X has been granted a licence to commence operation once industry readiness conditions are met. Like industry, ASIC is testing its systems and market data connections to ensure readiness in supervising the multi-market, and will continue to work with industry to ensure a smooth and orderly transition to maintain fair and efficient markets.

ASIC continues to engage with participants on operational issues in IT forums with SAA and AFMA members, as well as being in dialogue with ASX and Chi-X regarding their readiness and cooperation. As we have previously indicated, market operators will be afforded limited operational changes before 1 March 2012, beyond those that have already been announced and that are significantly progressed.

ASIC will soon release a consultation paper to seek further views on other wider market structure issues not directly linked to competition. There will be a lengthy consultation period and we aim to finalise the rules by Q2 in 2012.

Automated order processing: certifications and confirmations

As indicated in Issue 13 of the Market Supervision Update, market participants are required to send automated order processing (AOP) certifications or confirmations to ASIC by 7 October 2011. Market participants that do not meet this deadline cannot be assured of a written confirmation from ASIC by 31 October 2011.

ASIC has had a number of queries as to whether it is approving or attesting that participants have appropriate mechanisms in place to ensure the maintenance of fair and orderly markets, or that their best execution policies are in compliance with the market integrity rules. The role of ASIC in AOP Certifications, received under ASIC Market Integrity Rule (ASX) Automated Order Processing requirements, is to review and acknowledge that the participant has certified its AOP system and taken into regard the requirements of the ASIC Market Integrity Rules (specifically MIR 5.6). ASIC's role is not to approve the system's ability to maintain fair and orderly markets, or attest to its compliance with Best Execution rules.

It is ultimately market participants' responsibility to ensure they comply with all obligations under the Market Integrity Rules (Chi-X Market and ASX Market).

Cost recovery arrangements

On 26 August 2011, Assistant Treasurer Hon. Bill Shorten released a consultation paper on a proposed market supervision feed methodology and arrangements for the recovery of funding provided to ASIC to perform market supervision functions.

The proposed cost recovery arrangements have been designed by the government with regard to ASIC's market supervision cost drivers, as well as cost recovery approaches used by market regulators in other jurisdictions, such as FINRA, IIROC (Canada), FSA (UK) and the HKSFC.

The government's proposal will see stockbrokers, other market participants and market operators contribute to pay ASIC's costs to supervise Australia's equity markets, including those managed by the ASX and newcomer Chi-X, as part of the government's continued pursuit of competition in financial markets. All these parties are encouraged to make a submission to the consultation paper on the proposed cost recovery fee structure.

Market integrity rules for capital and related requirements

Last month, ASIC released market integrity rules (MIRs) for capital and related requirements for the ASX market and the ASX 24 market. The MIRs transfer to ASIC ASX's pre-existing capital and related requirements for the two markets, and is another step in the smooth transition in market supervision from ASX to ASIC in August 2010.

The MIRs amend the existing ASIC Market Integrity Rules for the two markets by inserting three new chapters for capital, reporting and margins. The ASX requirements that previously existed in relation to these areas have ceased to operate.

While generally the status quo has been maintained two minor changes should be noted; namely:

  • From 1 January 2012, all ASX 24 market participants must complete daily reconciliations of client money; and
  • From 1 January 2012, non-clearing ASX 24 market participants must lodge their monthly capital returns within ten business days (rather than one month) after the end of each calendar month.

ASIC also released Regulatory Guide 226 Guidance on ASIC market integrity rules for capital and related requirements: ASX and ASX markets, which provides advice on the operation of these rules.

Competition: Frequently asked questions

ASIC continues to publish FAQs dealing with the Competition MIRs and implementation issues on the market supervision section of the ASIC website. We will continue to use this to communicate further guidance on the Competition MIRs and implementation issues.

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:

  • Option 1 for real time market matters
  • Option 2 for other market related matters
  • Option 3 for Participant enquiries or matters
  • Option 4 for Market wide announcements.

Or you can reach the Market and Participant Team by email, or through your relationship manager.


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Last updated: 30/03/2021 09:35