ASIC Class Rule Waiver [CW 13-1073]

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Legislation au F2013L01908 Rules Not in force Legislative Instrument

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ASIC CLASS RULE WAIVER [CW 13-1073]

 

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

ASIC Market Integrity Rules (Competition in Exchange Markets) 2011

 

The Australian Securities and Investments Commission (ASIC) makes this instrument (the Class Rule Waiver) under Rules 1.2.1(1) and 1.2.3 of the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011 (the Competition Rules).

 

Under Rule 1.2.1(1), ASIC may relieve any person or class of persons from the obligation to comply with a provision of the Competition Rules, either generally or in a particular case or category, and either unconditionally or subject to such conditions as ASIC thinks fit.

 

Under Rule 1.2.3, ASIC may specify the period or specific event during which any relief from an obligation to comply with a provision of the Competition Rules may apply.

 

Capitalised terms in this Explanatory Statement refer to defined terms in the Competition Rules.

 

1. Background

 

On 5 August 2013, ASIC made ASIC Market Integrity Rules (Competition in Exchange Markets) Amendment 2013 (No. 2), which amended the Competition Rules. The amendment introduced new rules to address regulatory issues raised by recent market structure developments including a lack of consistent and readily accessible information to the market and to users of a Crossing System about how Crossing Systems operate and when orders may be executed on a Crossing System..

 

Disclosure requirements for Crossing Systems – information for users

Part 4A.3 of the Competition Rules imposes disclosure requirements for Crossing Systems. In particular, Rule 4A.3.2(1) requires a Participant that operates a Crossing System to provide a client with a copy of the Publicly Available Crossing System Information or inform the client of the website address where that information is available.

 

Rule 4A.3.2(2) requires a Participant that operates a Crossing System, prior to accepting an Order from a client for the first time and prior to accepting an order from a client after the Non-Public Crossing System Information has been updated, to provide that client with a document containing the Non-Public Crossing System Information relating to that Crossing System.

 

Monitoring activities in a Crossing System

Rule 4A.5.1(1) requires a Participant that operates a Crossing System to monitor the use of its Crossing System for compliance with the obligations imposed on the user by the operator of the Crossing System and with the operating procedures of the Crossing System; and take action to ensure any breaches identified by the Participant during the course of monitoring do not recur.

 

Rule 4A.5.1(2) requires a Participant to notify ASIC, in writing, of all significant breaches identified by the Participant during the course of monitoring undertaken under Rule 4A.5.1 as soon as practicable after identification of the relevant breach.

 

Rule 4A.5.1(3) requires a Participant to keep records that demonstrate the monitoring activities it undertakes under Rule 4A.5.1, and of all breaches identified under Rule 4A.5.1 for a period of seven years.

 

Rule 4A.5.1(4) provides that a Participant does not have to comply with this Rule until 10 November 2013.

2. Purpose of the class rule waiver

 

Paragraphs 4 and 5 – Disclosure requirements for Participants for client that use Crossing Systems

 

Paragraphs 4 and 5 of the Class Rule Waiver ensure that a Participant who operates a Crossing System is only required to disclose information to a client who is a user or may be a user of the Crossing System rather than to all clients.

 

The Class Rule Waiver has been made on the basis that a Participant should not be required to disclose information relating to a Crossing System to a client who does not use the Crossing System.

 

Paragraph 6 – Monitoring Crossing Systems

 

The purpose of paragraph 6 of the Class Rule Waiver is to extend the time for the commencement of Rule 4A.5.1 to allow Participants an additional implementation timeframe of six months.

3. Operation of the class rule waiver

 

Paragraphs 4 and 5 – Disclosure requirements for Crossing Systems – information for users

 

Paragraphs 4 and 5 of the Class Rule Waiver relieves a Participant from the obligation to comply with Rule 4A.3.2(1)(a) and Rule 4A.3.2(2) of the Competition Rules.

 

A Participant will only be able to rely on the Class Rule Waiver with respect to a client that does not use the Crossing System operated by the Participant.

 

The relief in paragraphs 4 and 5 of the Class Rule Waiver applies until withdrawn.   

 

Paragraph 6 – Monitoring activities in a Crossing System

 

Paragraph 6 of the Class Rule Waiver relieves a Participant from the obligation to comply with Rule 4A.5.1 of the Competition Rules for a period of six months.

 

The relief applies during until 9 May 2014.

4. Consultation

Paragraphs 4 and 5 – Disclosure requirements for Crossing Systems – information for users

 

ASIC did not consult specifically on paragraphs 4 and 5 of the Class Rule Waiver. However, in Consultation Paper 202 Dark liquidity and high-frequency trading: Proposals (CP 202) ASIC sought feedback on the proposal to make a market integrity rule requiring a Participant to provide information to users and prospective users of Crossing Systems.

 

The relief provided in paragraphs 4 and 5 of the Class Rule Waiver is to confirm the intention to limit the obligation on the Participant to disclose information to users or prospective users of Crossing Systems only and not all clients in general.

 

Paragraph 6 – Monitoring activities in a Crossing System

 

ASIC did not consult specifically on paragraph 6 of the Class Rule Waiver. However, ASIC consulted on the proposal to make a market integrity rule that would require a Participant to monitor order and trade activity on a Crossing System. ASIC considered the submissions on this obligation and in Report 364 Response to submissions on CP 202 Dark liquidity and high-frequency trading: Proposals, indicated the implementation time will be extended to nine months. This was communicated in Regulatory Guide 223: Guidance on ASIC market integrity rules for competition in exchange markets – see paragraph RG 233.471.

5. Statement of Compatibility with Human Rights
 

A Statement of Compatibility with Human Rights is included in this Explanatory Statement at Attachment B.

 


ATTACHMENT B

 

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

ASIC CLASS RULE WAIVER [CW 13/1073]

 

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

  1. Overview of the legislative instrument

 

The Australian Securities and Investments Commission (ASIC) makes this Legislative Instrument under Rules 1.2.1(1) and 1.2.3 of the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011 (the Competition Rules).

 

Under Rule 1.2.1(1), ASIC may relieve any person or class of persons from the obligation to comply with a provision of the Competition Rules, either generally or in a particular case or category, and either unconditionally or subject to such conditions as ASIC thinks fit.

 

Under Rule 1.2.3, ASIC may specify the period or specific event during which any relief from an obligation to comply with a provision of the Competition Rules may apply.

 

The Legislative Instrument grants relief for a Participant from the requirement to provide disclosure information relating to a Crossing System to a client who does not use a Crossing System. It is also extends to nine months the implementation timeframe for a Participant to monitor activities in a Crossing System..

 

2.      Human rights implications

 

This Legislative Instrument does not have any effect on human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 because it does not engage any of the applicable rights or freedoms. 

 

3.      Consultation

 

ASIC did not consult specifically on the Class Rule Waiver. However, in Consultation Paper 202 Dark liquidity and high-frequency trading: Proposals (CP 202) ASIC sought feedback on the proposal to make a market integrity rule requiring a Participant to provide information to users and prospective users of Crossing Systems. The relief provided in paragraphs 4 and 5 of the Class Rule Waiver is to confirm the intention to limit the obligation on the Participant to disclose information to users or prospective users of Crossing Systems only and not all clients in general.

 

ASIC considered the submissions on the proposal for a Participant to monitor activity on a Crossing System and in Report 364 Response to submissions on CP 202 Dark liquidity and high-frequency trading: Proposals, indicated that the implementation time will be extended to nine months. This has been communicated in Regulatory Guide 223: Guidance on ASIC market integrity rules for competition in exchange markets – see paragraph RG 233.471.

Overview

The ASIC Class Rule Waiver [CW 13-1073], enacted in 2013, was introduced to address specific regulatory issues raised by recent market structure developments, including the need for more consistent and accessible information about the operation of Crossing Systems and order execution timings. This waiver was issued by the Australian Securities and Investments Commission (ASIC) under the authority of the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011. The policy objective was to provide relief to participants who operate Crossing Systems by adjusting certain disclosure and monitoring requirements. This included exempting participants from providing certain information to clients who do not use the Crossing Systems, as well as extending the timeframe for compliance with monitoring activities to allow for a smoother implementation process.

Scope and Application

The ASIC Class Rule Waiver [CW 13-1073] applies to Participants who operate Crossing Systems within the Australian financial markets, as defined under the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011. This waiver specifically exempts these Participants from certain disclosure and monitoring obligations under the Competition Rules when dealing with clients who do not use or are not prospective users of the Crossing Systems. The waiver also extends the timeframe for compliance with monitoring activities in Crossing Systems by six months. This instrument is made under the authority of the Australian Securities and Investments Commission (ASIC) and applies across the Commonwealth of Australia. The relief provided by the waiver is subject to conditions and a specific timeframe, and it does not extend to clients who are users or prospective users of the Crossing Systems. Additionally, the waiver does not affect any rights or freedoms recognised or declared in the international human rights instruments, as confirmed in the Statement of Compatibility with Human Rights. ASIC did not conduct specific consultations on this waiver but considered feedback on related proposals in previous consultation papers and reports.

Key Provisions

The ASIC Class Rule Waiver [CW 13-1073] primarily provides relief from certain obligations under the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011 (Competition Rules). Specifically, Paragraphs 4 and 5 of the waiver exempt Participants from the requirement to disclose information to clients who do not use Crossing Systems. This waiver is applicable until it is withdrawn. Additionally, Paragraph 6 of the waiver extends the implementation period for monitoring activities in Crossing Systems by six months, until 9 May 2014. Participants who operate Crossing Systems are subject to specific obligations under the waiver. They are only required to disclose information to clients who are, or may be, users of the Crossing System. The waiver limits the disclosure obligation to these clients, ensuring that non-users are not subject to unnecessary information requirements. Furthermore, Participants must monitor their Crossing Systems for compliance with operator obligations and user procedures, and notify ASIC of any significant breaches. They are also required to keep records of these monitoring activities and breaches for seven years. Failure to comply with the requirements set out in the Competition Rules, even under the waiver, can result in various consequences. While the specific penalties are not detailed in the Class Rule Waiver itself, the Competition Rules outline potential offences and penalties for non-compliance. Breaches of the rules can lead to civil or criminal penalties, which may include fines or other sanctions, depending on the nature and severity of the breach. The exact penalties would be determined based on the specific provision breached and the circumstances of the non-compliance.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.