ASIC Market Supervision Update Issue 30
Suspicious activity reporting requirements
Market participants are reminded that from 20 January 2013, they will be required to comply with new suspicious activity reporting requirements under the market integrity rules.
The obligations, outlined under Part 5.11 of the ASIC Market Integrity Rules (ASX Market) 2010 and Part 5.11 of the ASIC Market Integrity Rules (Chi-X Australia Market) 2011, require a market participant to notify ASIC of certain suspicious trading activity.
In particular, the obligations require participants of the ASX and Chi-X markets to notify ASIC when they become aware, in the course of their business activities and in the course of complying with existing obligations, of certain suspicious trading activity.
Further, a market participant must notify ASIC if it has reasonable grounds to suspect that a person has placed an order or entered into a transaction while in possession of inside information, or which has, or is likely to have, the effect of creating or maintaining an artificial price or a false or misleading appearance in the market or price for trading in financial products.
ASIC expects that the rule will result in an increased number of useful reports by market participants of potential misconduct. ASIC also expects these reports may be received earlier than what is currently seen, which will in turn facilitate early identification by ASIC of possible misconduct.
Regulatory Guide 238 Suspicious activity reporting (RG 238), which ASIC released in July 2012, provides guidance on how market participants are expected to comply with the obligations.
End to best execution transitional period exemption
ASIC reminds market participants that the best execution transitional period under ASIC Market Integrity Rule 3.1.1 ends on 1 March 2013. This transitional period allowed participants to meet best execution obligations solely on ASX TradeMatch without accessing other markets until 31 October 2012, which was then extended to 1 March 2013.
The market share of Chi-X has increased steadily over the past year, with 'on-market' share for equity market products that are quoted on both ASX and Chi-X order books, reaching over 5% towards the end of 20121.
Participants should have already begun actively assessing whether or not accessing Chi-X will deliver better outcomes for their clients on a consistent basis at a reasonable cost. Such assessments are subject to each participant's individual circumstances. However, ASIC expects that where possible, they should reference 'on-market' statistics, which represent the accessible activity on alternative order books (ie. excluding NBBO and priority crosses).
Further guidance and information on best execution can be found in Regulatory Guide 223 Guidance on ASIC market integrity rules for competition in exchange markets (RG 223). Participants may also wish to consider the FAQs relating to best execution on the ASIC Markets homepage.
1On- market share is calculated here as (Chi-X value/Chi-X Value + ASX Value) for those Equity Market Products that are quoted on the order books of both ASX and Chi-X. This includes trades executed on Centre Point, Chi-X hidden orders, trades executed during market open and auction periods, but excludes reported crossings such as block special, portfolio special, Centre Point, NBBO and priority crossings.
Market participants should contact ASIC for market integrity issues and ASX and Chi-X respectively 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 email@example.com, or through your relationship manager.
For more information
Please see www.asic.gov.au/market-supervision.