ASIC Class Rule Waiver [CW 13/972]

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Legislation au F2013L01603 Rules Not in force Legislative Instrument

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ASIC CLASS RULE WAIVER [CW 13/972]

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

ASIC Market Integrity Rules (ASX 24 Market) 2010

The Australian Securities and Investments Commission (ASIC) makes this instrument under Rule 1.2.1(1) of the ASIC Market Integrity Rules (ASX 24 Market) 2010 (the ASX 24 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 ASX 24 Rules.

Capitalised terms in this Explanatory Statement refer to defined terms in the ASX 24 Rules.

1. Background

On 4 May 2013, ASIC made the ASIC Market Integrity Rules (ASX 24 Market) Amendment 2013 (No. 1), which amended Rule 2.2.1(1) of the ASX 24 Rules by extending the existing risk management requirements to proprietary trading by Market Participants. Prior to this amendment, the risk management requirements under Rule 2.2.1(1) applied only to Client Accounts.

In particular, Rule 2.2.1(1) was amended by:

(a) inserting a new paragraph 2.2.1(1)(ab) which requires a Market Participant to set and document appropriate pre-determined Order and/or position limits on each of its House Accounts, including a volume per Order limit, an aggregate loss limit and an aggregate net session limit, based on the Market Participant’s analysis of its financial resources or other relevant factors;

(b) amending existing paragraph 2.2.1(1)(c) to require that the House Account limits determined under new paragraph 2.2.1(1)(ab) be input by a Market Participant’s risk manager into Trading Platform account maintenance and will be established as preset accounts; and

(c) amending existing paragraph 2.2.1(1)(e) to require that, where a Market Participant amends the House Account limits referred to in new paragraph 2.2.1(1)(ab), the Market Participant must make these changes based on an analysis of the Market Participant’s financial resources or other relevant factors.

In addition to this, Rule 2.2.1(2) was also amended and a new subrule 2.2.1(4) was inserted, both of which impose new obligations on a Market Participant that connects to a Terminal for the purposes of Trading on a House Account.

A Principal Trader is a Market Participant that trades only on its own behalf. A Principal Trader engages in Trading on its House Account and must therefore comply with the new risk management obligations under Rule 2.2.1(1).

In some circumstances, a Principal Trader is a Client of another Market Participant (the Second Market Participant), and the Second Market Participant either:

(a) permits the Principal Trader to connect to a Terminal for the purposes of Trading for the Principal Trader’s House Account; or

(b) enters Orders on the Principal Trader’s House Account into the Trading Platform through the Second Market Participant’s Order System.

The Second Market Participant must comply with the risk management requirements under Rule 2.2.1(1) with respect to the Principal Trader as its Client. The Second Market Participant will set, document and input into trading platform account maintenance, limits on each of its Client Accounts, including those Clients that are Principal Traders.

2. Purpose of the class rule waiver

The purpose of this Class Rule Waiver is to relieve a Principal Trader from certain risk management obligations under Rule 2.2.1(1) with respect to its House Account in circumstances where the Principal Trader accesses the market as a Client of another Market Participant.

This Class Rule Waiver has been made on the grounds that the Market Participant responsible for access to the Terminal must comply with its risk management obligations under Rule 2.2.1(1) with respect to the Principal Trader as its Client. In these circumstances, the Principal Trader may not have the capability to set, document and input into trading platform account maintenance pre-determined order and/or position limits on its House Account.

3. Operation of the class rule waiver

Paragraph 4 of the Class Rule Waiver relieves a Principal Trader (within the meaning of Rule 1.4.3) from the obligation to comply with Rules 2.2.1(1)(ab), (b), (c) and (e).

A Principal Trader will only be able to rely on the Class Rule Waiver if the Principal Trader is a Client of the Second Market Participant and the Second Market Participant either:

(a) permits the Principal Trader to connect to a Terminal for the purposes of Trading for the Principal Trader’s House Account; or

(b) enters Orders on the Principal Trader’s House Account into the Trading Platform through the Second Market Participant’s Order System.

4. Consultation

One respondent to CP 195 submitted that, to date, the risk management obligations have been the responsibility of the Market Participant that provides its Clients and Principal Traders with access to the exchange. That Market Participant would generally set trading limits for those Clients and Principal Traders. The respondent submitted that it may be difficult for a Principal Trader that accesses the exchange through another Market Participant to comply with the proposed rules if the Principal Trader has no control over the trading limits that are set (see Report 343: Response to submissions on CP 195 Proposed amendments to ASIC market integrity rules: ASX 24 and FEX markets (REP 343) at paragraphs 15 to 17).

As a result of ASIC’s consideration of the submissions to CP 195, ASIC decided to give this Class Rule Waiver to Principal Traders that access the market as a Client of another Market Participant.

5. Statement of Compatibility with Human Rights

A Statement of Compatibility with Human Rights is included in this Explanatory Statement at 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 13/972]

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.

Overview of the legislative instrument

The Australian Securities and Investments Commission (ASIC) makes this instrument under Rule 1.2.1(1) of the ASIC Market Integrity Rules (ASX 24 Market) 2010 (the ASX 24 Rules).

Under that rule, ASIC may relieve any person or class of persons from the obligation to comply with a provision of the ASX 24 Rules.

A principal trader is a market participant of the ASX 24 market that trades only on its own behalf. A principal trader engages in trading on a house account and must therefore comply with the new risk management obligations under Rule 2.2.1(1) of the ASX 24 Rules which we made by ASIC pursuant to the ASIC Market Integrity Rules (ASX 24 Market) Amendment 2013 (No. 1) .

In some circumstances, a principal trader is a client of another market participant (the Second Market Participant), and the Second Market Participant either:

(a) permits the principal trader to connect to a terminal for the purposes of trading for the principal trader’s house account; or

(b) enters orders on the principal trader’s house account into the trading platform through the Second Market Participant’s order system.

The Second Market Participant must comply with the risk management requirements under Rule 2.2.1(1) with respect to the principal trader as its client. The Second Market Participant will set, document and input into trading platform account maintenance, limits on each of its client accounts, including those clients that are principal traders. The principal trader may not have the capability to set, document and input into trading platform account maintenance pre-determined order and/or position limits on its house account.

The Legislative Instrument relieves a principal trader from certain risk management obligations under Rule 2.2.1(1) with respect to its house account in these circumstances where the principal trader accesses the market as a client of another market participant.

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 consulted on the proposed amendments to the risk management requirements in Rule 2.2.1 in Consultation Paper 195 Proposed amendments to ASIC market integrity rules: ASX 24 and FEX markets (CP 195) in November 2012. As a result of ASIC’s consideration of the submissions to CP 195, ASIC decided to give the relief in the Legislative Instrument to principal traders that access the market as a client of another market participant.

Overview

The ASIC Class Rule Waiver [CW 13/972] was enacted by the Australian Securities and Investments Commission (ASIC) in 2013 under Rule 1.2.1(1) of the ASIC Market Integrity Rules (ASX 24 Market) 2010. This waiver was introduced to address the problem of ensuring that Market Participants, specifically Principal Traders who trade on their own behalf, could meet the newly introduced risk management obligations under Rule 2.2.1(1) of the ASX 24 Rules, which extended these obligations to include proprietary trading by Market Participants. The waiver provides relief to Principal Traders who access the market as a client of another Market Participant, relieving them from certain risk management obligations on the basis that the Market Participant responsible for access to the Terminal must already comply with these obligations. This approach ensures that the risk management requirements are effectively met without placing an undue burden on Principal Traders who lack the capability to independently set and manage their trading limits.

Scope and Application

The ASIC Class Rule Waiver [CW 13/972] applies to Principal Traders who are market participants in the ASX 24 market, trading solely on their own behalf and engaging in trading on a house account. This waiver is specifically designed to relieve these Principal Traders from certain risk management obligations under Rule 2.2.1(1) of the ASX 24 Rules when they access the market as a client of another market participant. This waiver is applicable nationally within the Commonwealth of Australia, encompassing entities and individuals involved in trading activities on the ASX 24 market. The geographic reach of this legislation is thus national, and it pertains to the conduct of entities and individuals participating in the ASX 24 market. The waiver does not impose any exclusions or exemptions but rather provides relief in specific circumstances where the risk management obligations may otherwise be unfeasible for the Principal Trader. This instrument extends its application through subordinate instruments as necessary to ensure compliance with the overarching ASX 24 Rules.

Key Provisions

The ASIC Class Rule Waiver [CW 13/972], made under Rule 1.2.1(1) of the ASIC Market Integrity Rules (ASX 24 Market) 2010, relieves a principal trader from certain risk management obligations in specific circumstances. Rule 2.2.1(1) of the ASX 24 Rules sets out risk management requirements for Market Participants, including pre-determined order and/or position limits based on the Market Participant’s financial resources or other relevant factors. These requirements were previously only applicable to Client Accounts, but were amended in 2013 to include proprietary trading by Market Participants. The Class Rule Waiver specifically exempts Principal Traders from complying with Rules 2.2.1(1)(ab), (b), (c) and (e) when they access the market as a client of another Market Participant. This relief is available if the Second Market Participant either permits the Principal Trader to connect to a Terminal for trading purposes or enters orders on the Principal Trader’s House Account through their order system. The rationale behind this waiver is to ensure that the Second Market Participant, who is responsible for the Market Participant’s access to the Terminal, complies with the risk management obligations with respect to the Principal Trader as their client. The obligations imposed by the ASX 24 Rules on Market Participants, including Principal Traders, primarily revolve around setting, documenting, and inputting pre-determined order and/or position limits for House Accounts into trading platform account maintenance. These obligations are designed to manage risks associated with trading activities. For Principal Traders who access the market as clients of another Market Participant, the waiver allows them to rely on the Second Market Participant to set these limits, provided the Second Market Participant meets their own risk management obligations. The Class Rule Waiver ensures that while Principal Traders are relieved of certain obligations, the Second Market Participants must still adhere to the detailed risk management requirements, thereby maintaining a structured and regulated trading environment. There are no explicit offences, penalties, or civil/criminal consequences mentioned for breaching the provisions of the Class Rule Waiver [CW 13/972] itself. However, any failure to comply with the overall ASX 24 Rules, including the risk management requirements, could lead to regulatory action by ASIC. Such actions may include enforcement measures, fines, or other penalties as stipulated in the ASIC Act and related regulations. The specifics of penalties for non-compliance with the ASX 24 Rules would depend on the nature and severity of the breach, but they are intended to ensure adherence to market integrity and protect market participants and investors.

Area of Law: Commercial Law; Financial Services Law
Instrument: Regulation
Concepts: Definitions & Interpretation; Regulatory Standards; Consultation Requirements; Prohibited Conduct

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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.

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