ASIC Class Rule Waiver [CW 13/1479]

Administered by Department of the Treasury

Legislation au F2013L01959 Rules Not in force Legislative Instrument

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Class Rule Waiver [CW 13/1479]

 

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 under Rule 1.2.1(1) of the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011(the "ASIC Market Integrity Rules (Competition)").

 

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 ASIC Market Integrity Rules (Competition) either generally or in a particular case or category and either unconditionally or subject to such conditions as ASIC thinks fit.

 

 

Capitalised terms in this Explanatory Statement refer to the defined terms in the ASIC Market Integrity Rules (Competition).

 

1.   Background

 

ASIC Market Integrity Rules (Competition)

 

On 29 April 2011, ASIC made the ASIC Market Integrity Rules (Competition) which form a part of the regulatory framework for competition between exchange markets.

 

The ASIC Market Integrity Rules (Competition) apply to:

(a) the activities or conduct of a Market;

(b) the activities or conduct of persons in relation to a Market; and

(c) the activities or conduct of persons in relation to Financial Products;

as specified in each chapter, part or rule of the ASIC Market Integrity Rules (Competition).

 

The Markets to which the ASIC Market Integrity Rules (Competition) apply currently include the Financial Market operated by Chi-X Australia Pty Ltd (ACN 129 584 667) ("Chi-X Australia").  The Financial Products to which the ASIC Market Integrity Rules (Competition) apply currently include Equity Market Products.

 

Pre-trade transparency requirements.

 

Rule 4.1.1(1) of the ASIC Market Integrity Rules (Competition) provides that, subject to rule 4.1.1(2), a Participant must not enter into a Transaction unless the Transaction is entered into by matching of a Pre-Trade Transparent Order on an Order Book.

 

Rule 4.1.1(1) reflects the importance of pre-trade transparency to the price formation process and fair and efficient markets.

 

An Order is Pre-Trade Transparent where Pre-Trade Information is made available for the Order by the Market Operator, in this instance Chi-X Australia.  Pre-Trade Information in relation to an Order for an Equity Market Product is set out in Rule 4.1.4, and includes: -

a)      Order date (Item 1);

b)     Order time (Item 2);

c)      Product identification (Item 3);

d)     Volume (Item 4);

e)      Order side (Item 5);

f)       Price (Item 6); and

g)     Currency (Item 7).

 

 

Rule 4.1.1(2) of the Competition Rules lists the exceptions to the requirement in Rule 4.1.1(1).

 

"Market on Close" Orders

Chi-X Australia has made changes to its Operating Rules Procedures to introduce "Market on Close" Orders.  A Market on Close Order is a type of Hidden Order.  Market on Close Orders result in Transactions where the price of the relevant equity securities is the official closing price for the day on the Financial Market operated by ASX Ltd ("ASX").  A detailed description of the process for matching Market on Close Orders can be found in Chi-X Australia's Operating Rules Procedures and Technical Notice, reference number 00020/13 (both available on the Chi-X Australia website, http://au.chi-x.com/).

Market on Close Orders are not Pre-Trade Transparent.  In particular, items 4 (volume) and 6 (price) of the Pre Trade Information are not made available for the Order.  A participant that enters into a Transaction as a result of a Market on Close Order may therefore breach rule 4.1.1(1) of the ASIC Market Integrity Rules (Competition).  

 

 

2.    Purpose of this Class Rule Waiver

 

This Class Rule Waiver waives a Participant's obligation to comply with rule 4.1.1(1) of the ASIC Market Integrity Rules (Competition) in circumstances where the Participant enters a Transaction as a result of placing a Market on Close Order.

 

ASIC is granting this Class Rule Waiver on the basis that we consider Market on Close Orders would result in investors receiving a fair price, being the ASX closing single price auction (commonly known as CSPA) price. This price is already transparent to the Market.   

 

 

3.   Operation of this Class Rule Waiver

 

Paragraphs 4 and 5

 

Paragraph 4 of the Class Rule Waiver provides relief to Participants from the obligation to comply with rule 4.1.1(1) of the ASIC Market Integrity Rules (Competition).  Paragraph 5 states that the Class Rule Waiver applies to a Transaction entered into by the Participant in accordance with Procedure 4.5 of the Chi –X Australia Operating Rules Procedures as a result of placing a Market on Close Order on the Chi-X Market.

 

This relief only applies to a Market on Close Order entered into in accordance with Procedures 4.2 and 4.5 of the Chi-X Australia's Operating Rules Procedures.

 

The relief applies for an indefinite period of time.

 

 

 

4. Consultation

 

ASIC has consulted with Chi-X Australia in relation to this Class Rule Waiver.  Chi-X Australia conducted a consultation process with its Market Participants in relation to its proposal to introduce Market on Close Orders.  Chi- X Australia has advised ASIC that there has been no objections or concerns raised with respect to the proposed Market on Close Orders.

 

 

5.  Statement of Compatibility with Human Rights

 

A Statement of Compatibility with Human Rights is included in this Explanatory Statement as Attachment "A".


ATTACHMENT "A"

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 13/1479]

This Class Rule Waiver 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

This Legislative Instrument provides relief to Participants of the Financial Market operated by Chi-X Australia Pty Ltd, ACN 129 584 667 ("Chi-X Australia") from Rule 4.1.1(1) of the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011 (the "ASIC Market Integrity Rules (Competition)"), in the case where the Participant enters into a Transaction by placing a "Market on Close" Order.

Rule 4.1.1(1) of the ASIC Market Integrity Rules (Competition) prohibits a Participant from entering into a Transaction unless the Transaction is entered into by matching of a Pre-Transparent Order on an Order Book of a Market. Rule 4.1.1(1) reflects the importance of Pre-Trade Transparency to the price formation process and fair and efficient markets.

This Legislative Instrument waives a Participant's obligation to comply with Rule 4.1.1(1) of the ASIC Market Integrity Rules (Competition) in circumstances where the Participant enters into a Transaction as a result of placing a "Market on Close Order".

A Market on Close Order is a new order type on the market operated by Chi-X Australia.  This is a type of Hidden Order where the price of the relevant equity securities is linked to the official closing price for the day on the Financial Market operated by ASX Ltd ("ASX").  A Market on Close Order is not Pre-Trade Transparent and, in particular, details of the price and volume of the Order are not available.  ASIC is granting this Class Rule Waiver on the basis that we consider Market on Close Orders would result in investors receiving a fair price, being the ASX closing single price auction (commonly known as CSPA) price. This price is already transparent to the Market.  

2.      Human rights implications

This 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.  This instrument does not create any new powers or obligations.

3.  Conclusion

This Instrument is compatible with human rights as it does not raise any human rights issues.

 

 

Australian Securities and Investments Commission

Overview

The ASIC Market Integrity Rules (Competition in Exchange Markets) 2011, enacted by the Australian Securities and Investments Commission (ASIC), addresses the need to maintain fair and efficient markets by ensuring pre-trade transparency in transactions. The ASIC Market Integrity Rules (Competition) are designed to govern the activities of market participants and financial products, particularly in relation to maintaining the integrity of price formation processes. This legislation was introduced to ensure that the competitive landscape among exchange markets in Australia is maintained without compromising transparency and fairness. ASIC, under Rule 1.2.1(1), has the authority to waive compliance with certain provisions of these rules, either generally or in specific cases, subject to conditions it deems appropriate. This waiver is particularly relevant to the introduction of "Market on Close" Orders by Chi-X Australia, which are not pre-trade transparent but are considered to result in a fair price for investors, aligning with the broader objective of maintaining a fair and efficient market. The Class Rule Waiver [CW 13/1479], issued by ASIC, provides relief to participants who enter into transactions through these "Market on Close" Orders, reflecting a balance between innovation in market practices and the preservation of market integrity.

Scope and Application

The ASIC Market Integrity Rules (Competition in Exchange Markets) 2011, as amended, govern the activities or conduct of markets and participants in relation to financial markets and financial products. These rules apply to the Financial Market operated by Chi-X Australia and include Equity Market Products, and they mandate pre-trade transparency to ensure price formation and market efficiency. This legislation allows ASIC to provide waivers from specific rules, such as Rule 4.1.1(1), which requires transactions to be matched by pre-trade transparent orders. The Class Rule Waiver [CW 13/1479] specifically exempts Participants from this requirement in the case of "Market on Close" Orders, which are not pre-trade transparent as they link to the official closing price on the ASX. The waiver applies to transactions entered into by Participants using these Market on Close Orders, providing them relief from the obligation to match pre-trade transparent orders, based on the assumption that the ASX closing price provides a fair and transparent outcome. The waiver operates indefinitely and applies only to Market on Close Orders placed in accordance with Chi-X Australia’s Operating Rules Procedures. There are no stated exclusions beyond these specified conditions.

Key Provisions

The Australian Securities and Investments Commission (ASIC) has introduced a Class Rule Waiver under the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011, providing specific relief to market participants of Chi-X Australia. This waiver pertains to Rule 4.1.1(1), which mandates that transactions must be executed by matching pre-trade transparent orders on an order book (paragraph 4). Rule 4.1.1(2) lists exceptions to this requirement. The Class Rule Waiver allows participants to enter transactions through Market on Close Orders without breaching Rule 4.1.1(1). These orders, which are a type of hidden order, result in transactions at the official closing price of the equity securities on the ASX, known as the closing single price auction (CSPA) price, which is already transparent to the market (paragraph 5). This waiver applies indefinitely to transactions entered into according to Procedure 4.5 of Chi-X Australia's Operating Rules Procedures as a result of placing a Market on Close Order (paragraph 5). The waiver imposes specific obligations on market participants of Chi-X Australia. It relieves them from the obligation to comply with Rule 4.1.1(1) of the ASIC Market Integrity Rules (Competition) when entering transactions through Market on Close Orders. These participants must ensure that such orders are entered in accordance with Procedures 4.2 and 4.5 of Chi-X Australia's Operating Rules Procedures. By doing so, they can benefit from the waiver while maintaining compliance with the broader regulatory framework (paragraph 5). This requirement is critical to ensuring that the waiver is applied correctly and that market participants understand the specific conditions under which it is effective. There are no specific offences, penalties, or consequences outlined in the Class Rule Waiver itself. However, any failure to comply with the ASIC Market Integrity Rules (Competition) outside the scope of this waiver could result in enforcement actions by ASIC. Such actions may include administrative penalties, public censure, or other regulatory measures as deemed necessary to enforce compliance with the rules. The maximum penalties for breaches of the ASIC Market Integrity Rules (Competition) can vary widely depending on the nature and severity of the breach, but they may include substantial fines and other sanctions aimed at ensuring adherence to market integrity and fair trading practices (Rule 1.2.1(1)).

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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.