ASIC has introduced new market integrity rules aimed at promoting the technological and operational resilience of securities and futures market operators and participants.
ASIC has also amended the prohibition on payment for order flow to address certain regulatory gaps and made deregulatory, minor and administrative amendments to 10 ASIC-made rule books.
ASIC Commissioner Cathie Armour said, ‘Our changes will ensure that our market integrity rules remain appropriate as our markets have become increasingly digitised and automated.
‘Australia’s markets and its participants are facing increased technological and operational risks. As we have seen in the past, such as with the November 2020 ASX outage, failures in these areas can have significant real-world consequences.
‘Our new rules set minimum expectations and controls to mitigate these risks and help to safeguard the integrity and resilience of Australia’s markets.’
Technological and operational resilience rules
The new technological and operational resilience rules that apply from 10 March 2023 relate to:
- change management
- information security
- business continuity planning
- governance and resourcing
- trading controls (market operators only).
These rules clarify and strengthen existing obligations for market operators and participants and provide greater domestic and international alignment.
Prohibition on payment for order flow
ASIC has extended the existing prohibition on payment for order flow in Part 5.4B of the Securities Markets Rules to cover, from 10 June 2022, when a market participant sells client order flow and payment for order flow that occurs amongst other market intermediaries.
These amendments are a proactive measure to avoid the emergence of payment for order flow arrangements in Australia.
Deregulatory, minor and administrative amendments
ASIC has made deregulatory, minor and administrative changes across 10 ASIC-made rule books to reduce the regulatory burden on participants and generally update and refine the rules. They include:
- In the Securities Markets Rules, ASIC has:
- repealed the retail client adviser accreditation regime;
- amended rules covering trade confirmations for non-retail clients and regulatory data reporting; and
- introduced a ‘good fame and character’ test for market operators.
- In the Futures Markets Rules, ASIC has:
- replaced the prohibited employment rule with a ‘good fame and character’ test, and extended the test for market operators;
- introduced suspicious activity reporting obligations; and
- removed the requirement for client authorisations to be in writing for block trade and exchange for physical orders.
- Across a number of rule books, ASIC has clarified which decisions are subject to merits review and its power to grant waivers from the rules.
These amendments have varying transition periods. The new ‘good fame and character test’ and suspicious activity reporting requirements apply from 10 June 2022.
In making all of the above amendments, ASIC considered feedback from market stakeholders, developments in the market and the approaches of other domestic and international regulators.