ASIC Market supervision update Issue 3
ASIC consults on equity market structure – regulatory framework
The Australian Securities and Investments Commission (ASIC) has today released a consultation package on enhancing regulation of Australia’s equity markets, including the introduction of competition between exchange markets. The consultation package includes an overview summary document, a detailed consultation paper, draft market integrity rules and a supporting economic report on equity market structure.
Consultation Paper 145
Australian equity market structure
(CP 145) and our report on the Australian equity market structure (REP 215) reviews recent and likely trends in global and Australian equity markets including the 6 May ‘flash crash’ in the US, high-frequency and algorithmic trading, and the lessons from other jurisdictions that have introduced competition between market operators. Equity markets globally are undergoing considerable change and they are now overwhelmingly electronic and automated.
Our regulatory response to these developments is guided by ASIC's high level priorities to: build confidence in the integrity of Australia's capital markets: protect retail investors: and facilitate international capital flows. The specific proposals in the CP are designed to support our objectives related to market quality, market integrity, investor protection, fairness and efficient implementation of changes to the regulatory regime.
Specifically CP 145 covers:
new controls to curb extreme price movements and to require transparent cancellation
arrangements – our response to the 'flash crash'
enhanced controls for direct electronic access and algorithmic trading – in response to the increasingly pervasive role of technology
formal obligations on market participants – to deliver best execution to clients
minimum disclosure about order and trade information – to promote efficient price formation on markets and reduce incentives for trading to shift to ‘dark pools’
consolidation of market data across all execution venues – to ensure whole of market transparency
market operator cooperation on trading halts and related matters
better regulatory data on orders and trades – to ensure ASIC's market supervision keeps pace with market developments.
The deadline for feedback on ASIC’s proposals is 21 January 2011. As part of the consultation process, the Australian Financial Markets Association, the Stockbrokers Association, and Financial Services Council have agreed to host ASIC information sessions in mid-November for their memberships. Further details will be provided by the associations to their members.
Other news from ASIC:
Automated order processing
Before using an Automated Order Processing (AOP) system, you must provide ASIC with a certification of your AOP system and receive a written confirmation of certification from ASIC. It is also important that any Market Participants considering making changes to their AOP system - in the current economic environment - consider whether those changes would be considered material, and, if so, that the appropriate notification is made to ASIC.
For more information regarding AOP requirements participants please see
and the relevant ASIC/ASX MIR within Part 5.6 of the
Submission of management structures
The closing date for the submission of management structures to ASIC has passed. If you were a Market Participant on the Commencement Date you should have provided a document that sets out your management structure and your allocation of responsibilities among your Responsible Executives by 1 November 2010.
For other Market Participants (i.e. those that became Market Participants after the Commencement Date), the ASIC /ASX MIR require that the management structure is provided to ASIC within 10 business days of becoming a Market Participant.
As a general rule, ASIC would expect participants to continue to report all breaches that they previously reported under the ASX operating rules. Given the importance of the market integrity rules, the materiality of associated fines, and taking into account the factors set out in s912D(1)(b)(i) to (v), ASIC would consider those previously reported breaches (or likely breaches) as "significant" for the purposes of s912D of the Corporations Act.
Note for Market Participants regarding withdrawal of Derivatives Adviser Accreditation
Where an Accredited Adviser ceases to be a representative of a Market Participant, the Market Participant must notify ASIC in writing within 5 business days of the date the Accredited Adviser ceased to be a Representative of the Market Participant, as well as providing the Accredited Adviser's full name and date of birth. For more information please see requirement under ASIC /ASX MIR 2.4.17.
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.
More about contacting ASIC about market supervision issues
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