EXPLANATORY STATEMENT for
ASIC CLASS RULE WAIVER [CW 16/0359]
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Class Rule Waiver 16-0359 (this instrument) under subrule 1.2.1(1) of the ASIC Market Integrity Rules (ASX Market) 2010 (the Rules). Under subrule 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. Under Rule 1.2.3 ASIC may specifiy the period during which any relief from the obligation to comply with a provision of the Rules may apply.
This instrument amends ASIC Class Rule Waiver [14-1091].
- Background
On 27 October 2014, ASIC granted Class Rule Waiver [CW 14-1091], providing relief to Participants of the Market operated by ASX Limited (ACN 008 624 691) (ASX) from Rule 3.4.1 in relation to Derivatives Markets Contracts only, subject to certain conditions.
Reasons for granting the original Class Rule Waiver
On 5 August 2013, ASIC amended Rule 3.4.3 to address regulatory issues arising from recent market developments, including the growing number of Market Participants establishing and operating automated services (referred to as 'Crossing Systems') that match or execute orders of their clients otherwise than on an Order Book of an exchange market (see the ASIC Market Integrity Rules (ASX Market) Amendment 2013 (No. 2).
The Waiver was originally granted because Participants queried whether it was ASIC's intention for Rule 3.4.3(1)(b) to apply to Derivative Market Contracts, as well as Cash Market Products. Rule 3.4.3 refers to Market Transactions, which is defined as "a transaction for one or more Products, entered into on a Trading Platform or reported to the Market Operator under the Market Operating Rules." Further, "Product" is defined as a "Cash Market Product or a Derivatives Market Contract, as applicable." Rule 3.4.3(1)(b), by virtue of the definition of Product, does apply to Derivatives Markets Contracts.
The Class Rule Waiver was therefore granted to allow for consultation, particularly in relation to the intended operation of the rule, the need for IT development and time for that IT development to occur.
Reasons for extending the original Class Rule Waiver
The consultation in relation to Rule 3.4.3(1)(b) now forms part of a broader package of regulatory reform. As a result, an extension to the waiver was deemed necessary to allow sufficient time for the reform package to become operational.
2. Purpose of the instrument
This Class Rule Waiver varies [CW 14-1091] by extending the relief from the obligation to comply with the notification requirements in relation to Derivative Market Contracts only in subrule 3.4.3(1)(b) of the Rules until 30 June 2017. The current Class Rule Waiver expires on 30 April 2016 and was originally granted to allow ASIC to consult with stakholders in relation to:
(a) the operation of the notification requirements in subrule 3.4.3(1)(b); and
(b) allow sufficient time for any necessary IT development to occur before the Rule becomes operational in relation to Derviatives Market Contracts.
As the consultation forms part of a broader package of reform, further time is required to complete the consultation. This instrument will extend the expiration date of CW [14-1091] to 30 June 2017 by which time any necessary changes to the Rule can be made and Participants can complete, and test, IT systems necessary to comply with the rule.
3. Operation of the instrument
The instrument substitues the expiration date stated in paragraph 6 of [CW 14/1091] of "30 April 2016", with "30 June 2017".
4. Documents Incorporated by reference
The Class Rule Waiver [14-1091] which this instrument amends, and accompanying Explanatory Statement, can be found at: https://www.legislation.gov.au/Details/F2014L01425.
5. Consultation
ASIC did not formally consult on this Class Rule Waiver as circumstances have not changed since the granting of the original Class Rule Waiver [CW 14/1091]. Further, the instrument is minor and machinery in nature. A Regulation Impact Statement was not required for this instrument as it is minor or machinery in nature and does not alter the existing requirements for Market Participants.
This legislative instrument is compatible with human rights as it does not raise any human rights issues.
Overview
The ASIC Class Rule Waiver [CW 16/0359], enacted in 2016 by the Australian Securities and Investments Commission (ASIC) under the Corporations Act 2001, extends a previously granted waiver to provide relief to participants of the Australian Securities Exchange (ASX) from the notification requirements in relation to Derivative Market Contracts. This waiver was introduced to address uncertainty and allow time for consultation and necessary IT development in response to regulatory changes affecting market participants who operate automated services. The extension of this waiver is necessary to complete the broader package of regulatory reform and ensure participants have sufficient time to update their systems to comply with the new requirements.
This instrument, prepared by ASIC, aims to modify the expiration date of the original waiver [CW 14/1091] from 30 April 2016 to 30 June 2017. The decision to extend the waiver was made without formal consultation as the circumstances had not changed significantly since the original waiver. Given that the changes are minor and of a technical nature, a Regulation Impact Statement was not required. The waiver does not raise any human rights issues and is compatible with existing human rights obligations.
Scope and Application
ASIC Class Rule Waiver [CW 16/0359] is made under the Corporations Act 2001, and it pertains to the Australian Securities and Investments Commission (ASIC) granting relief to certain persons or classes of persons from the obligation to comply with a provision of the Competition Rules. Specifically, this waiver extends the relief granted under [CW 14/1091], which was originally provided to Participants of the Market operated by ASX Limited from Rule 3.4.1 in relation to Derivatives Markets Contracts. The relief is extended until 30 June 2017 to allow for sufficient time for consultation and IT development related to the broader regulatory reform package. The waiver applies to participants in the market operated by ASX Limited and concerns the notification requirements in relation to Derivative Market Contracts. The geographic reach of this waiver is national, as it pertains to the market operated by ASX Limited, which is the primary securities exchange in Australia. There are no stated exclusions or exemptions in this waiver; however, the relief is specific to the notification requirements under Rule 3.4.1 in relation to Derivative Market Contracts. The waiver extends the application of the original relief by substituting the expiration date of 30 April 2016 with 30 June 2017. ASIC did not formally consult on this Class Rule Waiver as the circumstances have not changed since the granting of the original waiver, and the instrument is minor and machinery in nature.
Key Provisions
ASIC Class Rule Waiver 16-0359 primarily involves extending the relief granted by a previous waiver, CW 14-1091, to Participants of the Australian Securities Exchange (ASX) from the obligation to comply with the notification requirements in Rule 3.4.3(1)(b) of the ASIC Market Integrity Rules (ASX Market) (the Rules) (section 2). This extension is limited to Derivative Market Contracts and is intended to provide additional time for regulatory reforms and IT development to be completed. The waiver was originally granted to address uncertainties about the application of Rule 3.4.3(1)(b) to Derivative Market Contracts and to allow for stakeholder consultation. The waiver now extends the relief until 30 June 2017 (section 2).
The Act imposes obligations on ASX and its Participants to engage in consultation with ASIC regarding the operation of the notification requirements in Rule 3.4.3(1)(b) (section 2). This includes providing feedback on the intended operation of the rule and allowing sufficient time for any necessary IT development to occur before the rule becomes operational for Derivative Market Contracts. Participants must also ensure that their IT systems are updated to comply with the rule by the new expiration date of the waiver. Additionally, ASX must facilitate the consultation process and ensure that Participants are aware of the changes and requirements imposed by the waiver.
There are no explicit offences, penalties, or civil/criminal consequences stated in the Act for breach of the waiver provisions. However, non-compliance with the waiver or failure to update IT systems to comply with the rule by the extended date could potentially lead to regulatory scrutiny or enforcement actions by ASIC. Such actions might include requiring compliance, imposing fines, or other regulatory measures to ensure adherence to the rules and requirements outlined in the waiver. The maximum penalties for such breaches would be determined based on the specific nature and severity of the non-compliance, as governed by the overarching Corporations Act 2001 and ASIC's regulatory powers.