ASIC today released its annual assessment report of the ASX Group (ASX) licensees.

The assessment pays attention to how ASX dealt with a number of specific issues, including:

• the sufficiency of ASX’s technological resources in order to properly operate their facilities
• the operation and monitoring of the ASX 24 futures market during the assessment period, and the period 1 September 2013 to 3 October 2013
• procedures for considering listing applications from emerging market issuers
• its arrangements for ensuring compliance with the recently introduced capital-raising initiatives for small and mid-cap companies
• its processes for ensuring that fraudulent or unauthorised announcements are not made to the market through ASX Group’s market announcements platform (MAP)
• its processes for identifying and managing any conflicts of interest concerning its directors, and
• the operation and supervision of ASX’s Clearing and Settlement (CS) facilities.

The report sets out a number of areas the ASX has agreed to address, working closely with ASIC. While important, these issues did not cause ASIC to qualify the conclusion that ASX adequately met its obligations for the assessment period.

The agreed actions from this report deal with:

• Technology – ASX’s obligation to have sufficient technological resources to properly operate markets and clearing and settlement facilities. Any subsequent post-implementation review of Australian Market Regulation Feed projects by ASX should also focus on the processes of third-party vendors’ and vendor quality assurance practices when estimating the cost and duration of new projects
• Monitoring and enforcing compliance – ASX's obligation to have adequate arrangements for monitoring and enforcing compliance with its operating rules. ASX will make a number of changes including exploring improvements to its processes and procedures around the operation of the ASX 24 futures market, considering listing applications from emerging market issuers, detecting fraudulent or unauthorised company announcements and ensuring that small to mid-cap entities comply with newly introduced capital raising rules, and
• Clearing and Settlement – ASX's obligation to provide fair and effective clearing and settlement services. ASX will update internal processes to separately capture complaints it receives regarding the operation of the Trade Acceptance Service (TAS), which is the service it uses to provide clearing and settlement arrangements to Chi-X. ASX has also agreed to capture significant clearing participant complaints and corresponding responses within its complaints handling system.

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Report 401 Market assessment report: ASX Group (REP 401)

Background

ASX comprises two market licensees and four licensed clearing and settlement facilities - ASX Limited, ASX Clear Pty Limited (formerly known as Australian Clearing House Pty Limited), ASX Settlement Pty Limited (formerly known as ASX Settlement and Transfer Corporation Pty Limited), Australian Securities Exchange Limited (formerly known as Sydney Futures Exchange Limited), ASX Clear (Futures) Pty Limited (formerly known as SFE Clearing Corporation Pty Limited) and Austraclear Limited.

This is the first assessment where ASIC has included separate commentary on ASX Group's CS facilities.

A financial market is defined as a facility through which offers to buy and sell financial products are regularly made. A clearing and settlement facility is defined as a facility that provides a regular mechanism for the parties to transactions relating to financial products to meet obligations to each other that arise from entering into transactions. Anyone who operates a financial market or clearing and settlement facility in Australia must obtain a licence to do so, or otherwise be exempted by the Minister.

Under s794C(1) and s823C(1) of the Corporations Act 2001, ASIC may assess how well a financial market and clearing and settlement facility licensee is complying with any or all of its obligations.