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Thursday 21 December 2017

17-453MR Exchange traded products: guidelines for market licensees

ASIC has today released Information Sheet 230 Exchange traded products: Admission guidelines (INFO 230). It sets clear and consistent standards for all licensed exchanges seeking to admit exchange traded products (ETPs) including managed funds, exchange traded funds (ETFs) and structured productsto their market.

ASIC and the Australian Securities Exchange (ASX) have also agreed an admission process for ETPs on the ASX market where ASX will take full responsibility for the day-to-day admission process as it does with the admission of listed companies

Information sheet

The guidelines in INFO 230 largely reflect ASIC's existing expectations and current exchange market practice relating to:

  • approving ETP issuers
  • pricing of underlying assets of ETPs
  • exposure to derivatives
  • disclosure of portfolio holdings
  • liquidity provision and market making
  • securities lending
  • ongoing supervision of ETPs and issuers
  • waivers
  • product-naming considerations, and
  • other types of ETPs.

INFO 230 also outlines ASIC's  expectations for licensed Australian exchanges' ongoing supervision of ETPs and issuers, to ensure a fair, orderly and transparent market and compliance with the exchanges' operating rules. For example, expectations for licensed exchanges to proactively monitor on an ongoing basis that:

  • the continuous disclosure and other disclosure obligations are being met by issuers
  • the agreed liquidity/spreads are being complied with by market makers
  • issuers adhere to the ETP's intended derivative limits, and
  • the market is operating with integrity and there is adequate protection for retail investors.

Some elements of INFO 230 may need to be adjusted over time as the market continues to grow and innovate.

Updated ASX product admission process

ASIC will not assess ETPs on a case-by-case basis. ASX will be fully responsible for doing so under its governance and oversight model, as it currently is for listed companies..

ASIC expects to apply a similar approach to other market licensees seeking to admit ETPs.

ASIC Commissioner Cathie Armour said, 'This approach will require ASX, and other exchange market  licensees, when executing their gatekeeper role, to assess the overall suitability of ETPs for quotation, and to ensure general alignment with the strategic and reputational risk appetite of the market. ASIC will continue to focus its work with exchanges on the broader policy issues associated with the continuing growth and evolution of the Australian ETP market.