Crossing systems and their operators

What information should be disclosed under item 5 of Rule 5A.2.1(2) of the Securities Markets Rules and 5.2.1(2) of the Futures Markets Rules?

The purpose of this guidance is to clarify ASIC’s intent in relation to the new rules that require information about crossing systems to be made publicly available by participants that operate crossing systems (i.e. ‘crossing system operators’). In particular, that crossing system operators disclose where orders may be transmitted to, or received from, another crossing system operator (either directly or via an ‘aggregator’).

Rule 5A.2.1 of the ASIC Market Integrity Rules (Securities Markets) 2017 (Securities Markets Rules) and Rule 5.2.1 of the ASIC Market Integrity Rules (Futures Markets) 2017 (Futures Markets Rules) requires a market participant that operates a crossing system to make certain information about its crossing system publicly available on a website. In particular, the website should state:

(a) the code identifying the crossing system

(b) the date the crossing system began to operate in Australia

(c) the types of financial products traded on the crossing system

(d) the criteria used to determine eligibility to use the crossing system, and

(e) the codes identifying other crossing systems to which orders may be transmitted, or from which orders may be received.

The purpose of these rules is to improve transparency about crossing systems and to ensure there is publicly available information about:

(f) where client orders may be matched or executed (i.e. in the crossing system operated by the participant, or in other crossing systems operated by third parties), and

(g) the types of entities, based on the eligibility criteria referred to in item (d), whose orders may access the crossing systems in which clients' orders may be matched or executed.

Example of how orders may be transmitted or received

We have received questions from participants about the information that should be disclosed under item e) in circumstances where a crossing system operator (e.g. participant ‘A’):

(h) transmits orders directly to another crossing system operator (e.g. participant ‘B’) for matching or execution in participant B’s crossing system (i.e. the orders are transmitted from participant A and not from participant A’s crossing system), or

(i) receives orders directly from participant B for matching or execution in participant A’s crossing system (i.e. the orders are transmitted to participant A directly from participant B and not from participant B’s crossing system).

To ensure transparency of the matters set out in (f) and (g) above, we encourage that in the circumstances set out in (h) and (i), participant A would disclose the full legal name of participant B, a code that uniquely identifies participant B’s crossing system, and information about whether the orders are transmitted to, and/or received from participant B.

We have also received questions from participants about the information that should be disclosed under item (e) in circumstances where a crossing system operator (e.g. participant ‘A’):

(j) transmits orders to an ‘aggregator’ (i.e. a participant that operates an aggregation algorithm), who may in turn transmit all or part of the order to one or more crossing system operators (marked as B, C or D in the diagram), or to a licensed market, for matching or execution, or

(k) receives orders from an ‘aggregator’, where those orders may have been transmitted to the aggregator by one or more crossing system operators.

In the circumstances set out in (j), we would encourage participant A to disclose the full legal name of the operators of crossing systems B, C and D and a code that uniquely identifies crossing systems B, C and D. In the circumstances set out in (k), we would encourage participant A to disclose the same information, however if this is not possible, we would encourage participant A to disclose the full legal name of the participant that operates the aggregator and the code that uniquely identifies that participant's crossing system.