ASIC Market Integrity Rules (APX Market) 2010

ASIC MARKET INTEGRITY RULES (APX MARKET) 2010

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

Corporations Act 2001

The Australian Securities and Investments Commission (ASIC) makes the ASIC Market Integrity Rules (APX Market) 2010 (the Market Integrity Rules) under subsection 798G(1) of the Corporations Act 2001 (the Act).

Subsection 798G(1) of the Act provides that ASIC may, by legislative instrument, make rules that deal with:

(a) the activities or conduct of licensed markets;

(b) the activities or conduct of persons in relation to licensed markets;

Subsection 798G(1) of the Act is inserted by Schedule 1 of the Corporations Amendment (Financial Market Supervision) Act 2010 (the Amending Act).

On 24 August 2009, the Australian Government announced that it had decided to transfer the responsibility for supervision of Australia's domestic licensed financial markets from market operators to ASIC. The Amending Act gave effect to this decision and received Royal Assent on 25 March 2010. On 8 July 2010, the commencement date for Schedule 1 to the Amending Act was fixed by proclamation as 1 August 2010 (the Commencement Date).

These Market Integrity Rules apply to the market (the Market) operated by Asia Pacific Exchange Limited (the Market Operator) under Australian Market Licence (Asia Pacific Exchange Limited) 2004.

The main purpose of the Market Integrity Rules is to promote market integrity, protect investors and enable ASIC to perform the functions contemplated by the transfer of real-time supervision of the Market.

The Market Integrity Rules are based on a subset of the APX Business Rules that were in existence prior to the Commencement Date (the pre-commencement APX Business Rules). The split between the pre-commencement APX Business Rules and the Market Integrity Rules was agreed between ASIC and the Market Operator. The main guiding principles in adopting some of the APX Business Rules as Market Integrity Rules were that:

(a) existing operational and mechanical style rules, including the core operational functioning of the Market, should be the responsibility of the Market Operator;

(b) admission of participants should be the responsibility of the Market Operator;

(d) rules that assist the real-time monitoring of trading and market conduct should be the responsibility of ASIC; and

(e) rules relating to general participant conduct, including participant conduct with clients, should be the responsibility of ASIC.

To ensure market certainty and minimise impact on participants on the Commencement Date, ASIC has, to the extent possible, maintained the substance of the regulatory regime embodied in the pre-commencement APX Business Rules on which the Market Integrity Rules are based. Amendments were made to the drafting of those rules to reflect the transfer of supervisory responsibility for those rules to ASIC.

Details of the Market Integrity Rules are contained in the Attachment.

Targeted consultation on the Market Integrity Rules was conducted during the first half of calendar year 2010. The Market Integrity Rules reflect amendments which were made as a result of this consultation.

Subsection 798G(1) of the Act provides that market integrity rules are legislative instruments for the purposes of the Legislative Instruments Act 2003.

Subsection 798G(2) of the Act provides that market integrity rules may include a penalty amount for a rule. A penalty amount must not exceed $1,000,000. The penalty amount set out below a Market Integrity Rule is the penalty amount for that Market Integrity Rule.

The Market Integrity Rules will commence on the later of the day they are registered on the Federal Register of Legislative Instruments or the Commencement Date.

ATTACHMENT

Chapter 1: Introduction

Part 1.1. Preliminary

Rule 1.1.1 Enabling legislation

Rule 1.1.1 provides that the enabling legislation for these Rules is subsection 798G(1) of the Corporations Act.

Rule 1.1.2 Title

Rule 1.1.2 provides that the title for these Rules is ASIC Market Integrity Rules (APX Market) 2010.

Rule 1.1.3 Commencement

Rule 1.1.3 provides that these Rules commence on the later of:

(a) the day the instrument is registered under the Legislative Instruments Act 2003; and

(b) the commencement of Schedule 1 to the Corporations Amendment (Financial Market Supervision) Act 2010.

The commencement of Schedule 1 of the Corporations Amendment (Financial Market Supervision) Act has been fixed by proclamation as 1 August 2010.

Rule 1.1.4 Scope of these Rules

Rule 1.1.4 provides that these Rules apply to:

(a) the activities or conduct of the Market;

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

Rule 1.1.5 Entities that must comply with these Rules

Rule 1.1.5 provides that the following entities must comply with these Rules:

(a) the Market Operator;

(b) Market Participants; and

as specified in each Rule.

Rule 1.1.6 Conduct by officers, employees or agents

Rule 1.1.6 provides that in these Rules, conduct engaged in on behalf of a person by officers, employees or other agents of the person is deemed to have been engaged in by the person. Rule 1.1.6 also provides that in these Rules, conduct engaged in on behalf of a person by any other person at the direction or with the consent or agreement (express or implied) of an officer, employee or other agent of the person, is deemed to have been engaged in by the person.

Rule 1.1.6 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

Rule 1.1.7 State of mind of a person

Subrule 1.1.7(1) provides that, if for the purposes of these Rules in respect of conduct engaged in by a person, it is necessary to establish the state of mind of the person, it is sufficient to show that an officer, employee or other agent of the person had that state of mind.

Subrule 1.1.7(2) provides that, in subrule (1), a reference to the state of mind of a person includes a reference to the knowledge, intention, opinion, belief or purpose of the person and the person’s reasons for the person’s intention, opinion, belief or purpose.

Rule 1.1.7 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

Part 1.2 Waiver

Rule 1.2.1 Waiver of Rules

Subrule 1.2.1(1) provides that ASIC may provide a waiver from any or all of the Rules to an entity. Subrule 1.2.1(2) provides that a waiver may be given subject to conditions. Subrule 1.2.1(3) provides that a waiver, and an application for a waiver, must be in writing. Subrule 1.2.1(4) provides that, in Part 1.2 of the Rules, "waiver" means a waiver under Rule 1.2.1.

Rule 1.2.1 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

Rule 1.2.2 Compliance with conditions

Rule 1.2.2 provides that failure to comply with a condition imposed under Rule 1.2.1 is a contravention of Rule 1.2.2.

Rule 1.2.2 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

Rule 1.2.3 Period during which relief applies

Rule 1.2.3 provides that ASIC may specify that a waiver applies for a specific period.

Rule 1.2.3 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

Rule 1.2.4 Register

Subrule 1.2.4(1) provides that ASIC may establish and maintain a register for recording details of relief granted under Rule 1.2.1 and sets out the details that may be entered in the register. Subrule 1.2.4(2) provides that ASIC may publish the register.

Rule 1.2.4 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

Part 1.3 Notice, notification and service of documents

1.3.1 Market participant to have email system

Rule 1.3.1 provides that a Market Participant must acquire and maintain an operating email system for the purposes of receiving notices under the Market Integrity Rules.

Rule 1.3.1 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

1.3.2 Methods of giving notice in writing

Rule 1.3.2 specifies the methods by which ASIC may give notice under the Market Integrity Rules

Rule 1.3.2 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

Part 1.4 Interpretation

Rule 1.4.1 References to time

Rule 1.4.1 provides that in the Rules, references to time are to the time in Sydney, Australia.

Rule 1.4.1 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

Rule 1.4.2 Words and expressions defined in the Corporations Act

Rule 1.4.2 provides that words and expressions defined in the Corporations Act will unless otherwise defined or specified in these Rules or the contrary intention appears, have the same meaning in the Rules.

Rule 1.4.2 is a new Rule made to ensure consistency between these Rules and those applying to other domestic licensed financial markets.

Rule 1.4.3 Definitions

Rule 1.4.3 provides definitions for terms used in the Rules. Rule 1.4.3 includes new definitions for:

“Fair Settlement Price”;
“Listing Rules”;
“Market”;
“Market Listing Rules”;
“Market Operator”;
“Market Operating Rules”;
“Market Participant”;
“Operating Rules”;
“Other Regulated Entities’;
“Supervising Manager”.

The other definitions in Rule 1.4.3 reflect APX Business Rule 1.11.

Chapter 2: Market Participants

Part 2.1 Market Participant requirements

Rule 2.1.1 Requirements

Rule 2.1.1 provides that a Market Participant must be a company and must ensure that each Director and each person who is, or would be, a Substantial Holder of the Market Participant or its holding company, is of good fame and character and high business integrity.

Rule 2.1.1 reflects APX Business Rule 2.12.2.

Part 2.2 Accounts and records

Rule 2.2.1 Market Participant must maintain records

Subrule 2.2.1(1) provides that a Market Participant must maintain records in sufficient detail to show particulars of:

(a) client agreement documentation for the opening of accounts, setting out the information specified in the Rule;

(b) all monies received or paid by the Market Participant, including trust account receipts and payments;

(c) all Orders received for the purchase or sale of Securities, including the details specified in the Rule, which must be serially numbered and retained for 7 years whether or not the Order is executed;

(d) all purchases and sales of Securities as Principal by the Market Participant and the charges and credits arising from them;

(e) all transactions by the Market Participant with or for the account of the parties specified in the Rule, and other Market Participants;

(f) all income from commissions, interest and other sources and all expenses, commissions and interest paid;

(g) all assets and liabilities, including contingent liabilities of the Market Participant;

(h) all Securities which are the property of the Market Participant, showing with whom they are deposited and, if held otherwise than by the Market Participant, whether they have been lodged as collateral security for loans or advances;

(i) all Securities which are not the property of a Market Participant but for which that Market Participant or any nominee controlled by it is accountable, showing by whom and for whom those Securities are held and the details specified in the Rule;

(j) all underwriting agreements and transactions entered into by the Market Participant.

Subrule 2.2.1(2) provides that all Securities held for safe custody must be registered either in the name of the client or the Market Participant’s nominee.

Subrule 2.2.1(3) provides that the deposit of Securities with any person or firm or corporation as collateral security for loans or advances made to the Market Participant must be authorised in writing by the owner of the Securities or another person lawfully entitled to give that authorisation and the written authority must specify the period for which the Securities may be deposited.

Subrule 2.2.1(4) provides that the Market Participant must retain copies of all documentation related to the obligations of Rule 2.2, and all trade confirmations, for not less than seven years.

Subrule 2.2.1(5) provides that Rule 2.2.1 applies, to the extent applicable, not only to records of the Market Participant’s principal office but also to those of any branch office and to any nominee company beneficially owned and operated by a Market Participant for the purpose of conducting the business of the Market Participant.

Rule 2.2.1 reflects APX Business Rule 3.3.

Part 2.3 Trust Accounts

Rule 2.3.1 Trust account requirement

Rule 2.3.1 provides that a Market Participant must open and maintain at least one trust account in accordance with the Corporation Act.

Rule 2.3.1 reflects APX Business Rule 3.4.2.

Rule 2.3.2 Trust account withdrawals

Rule 2.3.2 provides that any deposit or withdrawal of funds from a trust account must comply with the Corporations Act.

Rule 2.3.2 reflects APX Business Rule 3.4.3.

Rule 2.3.3 Afterhours dealings with trust monies

Rule 2.3.3 provides that all monies which are required under the Corporations Act to be paid into a trust account, but which are received by the Market Participant after business hours, must be paid into the trust account on the first Business Day following the date of receipt.

Rule 2.3.3 reflects APX Business Rule 3.4.4.

Rule 2.3.4 Market Participant borrowing

Rule 2.3.4 provides that a Market Participant borrowing money in connection with the financial services business carried on by the Market Participant must have deposited that money within the time specified in Rule 2.3.3 to the Market Participant’s separate trust account with an Australian ADI that contains no money other than money lent to the Market Participant, until and unless the Market Participant receives from the lender executed loan documentation which specifies that the Market Participant is not obliged to hold the money in trust.

Rule 2.3.4 reflects APX Business Rule 3.4.5.

Rule 2.3.5 Trial Balances

Rule 2.3.5 provides that a Market Participant must ensure not later than the fourteenth business day of every month, that its books of account are in balance as at the end of the immediate preceding month, and a record of the monthly trial balances must be retained by the Market Participant until such time as each succeeding audit under the Corporations Act is completed.

Rule 2.3.5 reflects APX Business Rule 3.5.

Chapter 3 Trading responsibility of Market Participants

Part 3.1 Trading Messages

Rule 3.1.1 Market Participant responsibility for Trading Messages

Subrule 3.1.1(1) states that a Market Participant is responsible for each Trading Message submitted by that Market Participant to the Market Operator. Subrule 3.1.1(2) provides that, without limiting subrule (1), a Market Participant is responsible for errors contained in the Market Participant’s Trading Messages and for Trading Messages originating from the Market Participant which are submitted in error or without the authority of the Market Participant.

Rule 3.1.1 reflects APX Business Rule 4.4.1.

Rule 3.1.2 Market Participant deemed to have submitted Trading Messages of Authorised Persons

Rule 3.1.2 provides that if a Trading Message is submitted by an Authorised Person of a Market Participant, that Trading Message is deemed for all purposes under the Rules to have been submitted with the authority of the Market Participant.

Rule 3.1.2 reflects APX Business Rule 4.4.2.

Part 3.2 Market Participant compliance capacity

Rule 3.2.1 Organisational and technical resources

Rule 3.2.1 provides that a Market Participant must have and maintain the necessary organisational and technical resources to ensure that Trading Messages submitted to the Market Operator by the Market Participant do not interfere with the efficiency and integrity of the Market and that the Market Participant at all times complies with the Rules.

Rule 3.2.1 reflects APX Business Rule 4.4.4.

3.2.2 Systems to determine information

Rule 3.2.2 provides that, without limiting Rule 3.2.1, a Market Participant must have systems in place to determine at all times the Order that corresponds to a Trading Message, the identity and capacity of the person placing each Trading Message and whether the Trading Message was submitted by the Market Participant acting as Principal or as agent for a client.

Rule 3.2.2 reflects APX Business Rule 4.4.5.

Part 3.3 Orderly Market

Rule 3.3.1 Orderly market requirement

Rule 3.3.1 provides that a Market Participant must ensure that it transacts business on the Market so as to maintain an orderly market at all times.

Rule 3.3.1 reflects APX Business Rule 4.5.1.

Rule 3.3.2 Prevention of manipulative trading

Rule 3.3.2 provides that a Market Participant must not make a Bid or Offer for, or deal in, Securities on the Market which would result in a breach of sections 1041A, 1041B or 1041C of the Corporations Act by the Market Participant or a client of the Market Participant.

Rule 3.3.2 reflects APX Business Rule 4.6.

Rule 3.3.3 Records and Identification of Order Source

Rule 3.3.3 provides that, without limiting any other Rule, a Market Participant must maintain for a period of seven years, records of the matters referred to in Rule 3.2.2.

Rule 3.3.3 reflects APX Business Rule 4.8.1.

Part 3.4 Dealings in Securities of Listees for which Official Quotation sought

Rule 3.4.1 Prohibition

Rule 3.4.1 provides that, except as permitted by Rule 3.4.2, a Market Participant is prohibited, either in its own office or elsewhere, from making quotations or dealing in a new issue or placement of Securities (except Fixed Interest Securities):

(a) made for the purpose of qualifying a Listee for admission to the Official List of Market Operator; or

(b) for which Official Quotation will be sought,

until such Securities have been granted Official Quotation

Rule 3.4.1 reflects APX Business Rule 4.15.1.

Rule 3.4.2 Exception

Rule 3.4.2 sets out exceptions to the prohibition under Rule 3.4.1.

Rule 3.4.2 reflects APX Business Rule 4.15.2.

Part 3.5 Trading halts

Rule 3.5.1 Where a trading halt declared

Rule 3.5.1 provides that if the Market Operator grants a trading halt, each Market Participant must refer all Orders in relation to the Securities of that Listee to the relevant clients for new instructions as soon as practicable.

Rule 3.5.1 reflects APX Business Rule 4.36.1.

Rule 3.5.2 Market Participant obligations if Security suspended

Rule 3.5.2 provides that if the Market Operator suspends the Securities of a Listee from trading on the Trading System for any reason each Market Participant must refer all Orders in relation to those Securities to the relevant clients for new instructions.

Rule 3.5.2 reflects APX Business Rule 4.36.2.

Part 3.6 Takeovers

Rule 3.6.1 Announcement

Subrule 3.6.1(1) sets out information that a Market Participant must include in an announcement to the Market Operator in relation to a market bid, in addition to the information required by the Corporations Act. Subrule 3.6.1(2) provides that, where the offer Period is extended, the Market Participant must include in the announcement of that extension the latest time that the Market Participant will accept Offers to sell shares in the Target under the extended Offer Period.

Rule 3.6.1 reflects APX Business Rule 4.43.1.

Rule 3.6.2 Announcement requirement

Rule 3.6.2 sets out information that a Market Participant acting on behalf of a Bidder in relation to a market bid must announce to the Market Operator.

Rule 3.6.2 reflects APX Business Rule 4.43.2.

Part 3.7 Acquisition of shares

Rule 3.7.1 Restrictions during bid period

Rule 3.7.1 provides that when a Market Participant is acting on behalf of a Bidder that has made an off-market bid or a market bid in respect of a class of shares in a Target, the Market Participant must not on behalf of the Bidder offer to buy or buy shares of that class in the Target during the bid period at a price per share which is different from the amount of any consideration:

(a) which is payable (or deemed under the Corporations Act to be payable) under the off-market bid; or

(b) which has been specified (or deemed under the Corporations Act to have been specified) in the Announcement,

as the case may be, until an Announcement of the varied price has been given to the Market Operator.

Rule 3.7.1 reflects APX Business Rule 4.44.1.

3.7.2 Restrictions where a second announcement

Rule 3.7.2 provides that where shares of a Target are the subject of a takeover bid, a Market Participant that makes an announcement of a second (or subsequent) and competing Takeover for shares of that Target must not acquire on behalf of the Bidder (its client) any shares in that Target until the Market is informed of the contents of the second (or subsequent) announcement.

Rule 3.7.2 reflects APX Business Rule 4.44.2.

Part 3.8 Prohibition on advice to client in some instances

3.8.1 Client definition

Rule 3.8.1 provides that, for the purposes of Rules 3.8.2 and 3.8.3, “client” includes a security holder in a Market Participant.

Rule 3.8.1 reflects APX Business Rule 5.9.1

3.8.2 Prohibition of advice where in possession of Inside Information

Rule3.8.2 provides that, subject to Rule 3.8.3, where, as a result of its relationship with a client, a Market Participant is in possession of Inside Information, that Market Participant must not give advice to another client of a nature that would damage the interest of either of those clients.

Rule 3.8.2 reflects APX Business Rule 5.9.2.

3.8.3 Chinese Walls exception

Rule 3.8.3 provides that Rule 3.8.2 does not apply where a Market Participant has Chinese Walls in place and the person advising a client is not in possession of the Inside Information.

Rule 3.8.3 reflects APX Business Rule 5.9.3.

Part 3.9 Confirmations

3.9.1 Confirmation requirement

Rule 3.9.1 provides that, in respect of each purchase or sale of Securities executed for a client of a Market Participant, the Market Participant must confirm the transaction in accordance with section 1017F of the Corporations Act.

Rule 3.9.1 reflects APX Business Rule 5.14.1.

3.9.2 Electronic confirmation

Rule 3.9.2 provides that a Market Participant must not dispatch electronically the confirmation to a client and/or the Market Participant under these Rules, unless the client has consented to electronic dispatch and that consent has not been withdrawn.

Rule 3.9.2 reflects APX Business Rule 5.14.2.

3.9.3 Written record

Rule 3.9.3 provides that a Market Participant to keep a written record of a consent or withdrawal of consent by a client to the electronic dispatch of confirmations under Rule 3.9.2.

Rule 3.9.3 reflects APX Business Rule 5.14.3.

3.9.4 Confirmation documentation

Rule 3.9.4 sets out matters that a confirmation must have reproduced on it, except in the case of transactions in Securities identified under the Market Operating Rules as deferred delivery.

Rule 3.9.4 reflects APX Business Rule 5.14.4.

3.9.5 Identification of the Market Participant requirement

Rule 3.9.5 provides that the confirmation made under these Rules must identify the Market Participant which executed the purchase or sale.

Rule 3.9.5 reflects APX Business Rule 5.14.7.

3.9.6 Endorsement requirement

Rule 3.9.6 provides that where Securities are sold to clients pursuant to Rule 3.13.1, the confirmation must be endorsed with a statement to that effect.

Rule 3.9.6 reflects APX Business Rule 5.14.8.

3.9.7 Restriction on giving advice

Rule 3.9.7 provides that where the provisions of Rule 3.14.1 apply and the Market Participant advises the selling Market Participant that it is acting for the Bidder(s), and that it was unable to give the selling Market Participant advice in respect of the proposed sale, the confirmation must be endorsed with a statement indicating that the Market Participant was unable to give advice to the selling Market Participant and that no advice was given.

Rule 3.9.7 reflects APX Business Rule 5.14.9.

Part 3.10 Corners

3.10.1 Actions where a corner exists

Rule 3.10.1 provides provides for steps ASIC may take when, in the opinion of ASIC, a person or company or two or more persons and/or companies acting in concert, have acquired such control of a Security admitted to Quotation by the Market Operator, that the Security cannot be obtained for delivery on existing contracts (“affected contracts”) except at prices or on terms arbitrarily dictated by such persons and/or companies which are unfair, harsh, or unconscionable.

Rule 3.10.1 reflects APX Business Rule 5.15.1.

3.10.2 Arbitrations requirement

Rule 3.10.2 provides that if the parties to an affected contract under Rule 3.10.1 do not agree on a Fair Settlement Price and set a date for payment, they must submit the matter in dispute to arbitration.

Rule 3.10.2 reflects APX Business Rule 5.15.2.

Part 3.11 Expenses

3.11.1 Restrictions on charging out-of-pocket expenses

Rule 3.11.1 provides that a Market Participant must not charge a client out-of-pocket expenses incurred in the purchase or sale of Securities where such charge is covered by an increase or reduction in the price.

Rule 3.11.1 reflects APX Business Rule 5.16.

Part 3.12 Nominee shareholdings

3.12.1 Beneficial ownership for registration requirement

Subrule 3.12.1(1) provides that where a Market Participant it is not the beneficial owner of Securities, the Market Participant must not register those Securities in its own name or in the name of its Directors or employees. Subrule 3.12.1(2) provides that Securities of which the Market Participant is not the beneficial owner may only be registered in the name of a nominee company:

(a) that is incorporated in Australia with a name which contains the word “nominee”;

(b) that has a constitution that precludes the nominee company from beneficially owning any Securities or other property except cash; and

Rule 3.12.1 reflects APX Business Rule 5.17.

Part 3.13 Disclosure of shortfall

3.13.1 Restrictions on offering shares acquired through underwriting

Rule 3.13.1 provides that a Market Participant which is required to acquire Securities as underwriter or sub-underwriter must not offer those Securities to a client unless:

(a) the Market Participant first discloses to the client the closing date of the issue or offering of the Securities and the reasons for the acquisition; or

(b) 90 days have passed from the closing date.

Rule 3.13.1 reflects APX Business Rule 5.18.

Part 3.14 Takeovers – acting for Bidder; on-market buy-backs

3.14.1 Action for the Bidder; on market buybacks

This Rule provides that where a Market Participant:

(a) has an order from an Bidder under a Takeover in relation to the Securities the subject of the Takeover; or

(b) acts for a Listee involved in an on-market buy-back of Securities under the Corporations Act;

the Market Participant must not accept, or transact, an order to sell the relevant Securities unless the Market Participant:

(i) it is acting for the Bidder or the Listee involved in the on-market buy-back; and

(ii) that it is unable to advise the Selling Market Participant in respect of the proposed sale; and

(d) does not give the Selling Market Participant any advice in respect of the proposed sale.

Rule 3.14.1 reflects APX Business Rule 5.19.

Chapter 4 Conduct of others

Part 4.1 Responsibility for conduct of others

Rule 4.1.1 Market Participant responsibility for Supervising Manager

Rule 4.1.1 states that each Market Participant is responsible under the Rules for the conduct of each Supervising Manager of the Market Participant.

Rule 4.1.1 reflects APX Business Rule 7.1.1

Part 4.2 Common Ownership

Rule 4.2.1 Associations and connections

Rule 4.2.1 sets out the circumstances in which a Market Participant is associated or connected with another Market Participant for the purposes of the Rules.

Rule 4.2.1 reflects APX Business Rule 7.3.2.

Rule 4.2.2 Where a Director of more than one Market Participant

Rule 4.2.2 provides that where a person is a Director of more than one Market Participant:

(a) that person must nominate a primary Market Participant and provide written advice to ASIC of the nominated primary Market Participant; and

(b) the Director must not request access to the records of Orders referred to at Subrule 2.2.1(c) of Market Participants other than the primary Market Participant, unless the Director has obtained the prior approval of ASIC.

Rule 4.2.2 reflects APX Business Rule 7.3.3.

Rule 4.2.3 Market Participant must advise ASIC on becoming associated with or connected with another

Rule 4.2.3 provides that a Market Participant must advise ASIC immediately in writing on becoming associated with or connected with another Market Participant under Rule 4.2.1.

Rule 4.2.3 reflects APX Business Rule 7.3.5.

Rule 4.2.4 Market Participant must inform client of business carried out

Rule 4.2.4 requires that a Market Participant which is the subject of Rules 4.2.1 to 4.2.4 must fully inform its clients of the type of business carried on by the Market Participant.

Rule 4.2.4 reflects APX Business Rule 7.3.6.

Part 4.3 Provision of Information to ASIC Concerning Ownership and Control

Rule 4.3.1 Market Participant must advise ASIC of any change of Directors

Rule 4.3.1 requires a Market Participant to advise ASIC in writing by no later than the next Business Day of any resignation by a Director or appointment of a Director.

Rule 4.3.1 reflects APX Business Rule 7.4.1.

Part 4.4 Provision of information to ASIC

Rule 4.4.1 Market Participant must notify where admission or recognition may be affected

Rule 4.4.1 requires that if a Market Participant becomes aware of:

(a) anything that would create a basis for withdrawing the admission of the Market Participant under the Market Operating Rules; or

(b) anything in relation to a Supervising Manager of the Market Participant which would create a basis for withdrawing recognition of that Supervising Manager under the Market Operating Rules,

the Market Participant must as soon as practicable give notice in writing to ASIC stating the particulars of what has occurred.

Rule 4.4.1 reflects APX Business Rule 7.6.1.

Rule 4.4.2 Market Participant to notify ASIC where action initiated against them

Rule 4.4.2 provides that Market Participants must advise ASIC in writing by no later than the next Business Day after they have been advised by the Market Operator or any regulatory body or any other person who may be authorised pursuant to the Corporations Act, of any action which may be taken against them by the Market Operator, any regulatory body or an authorised person under the Corporations Act.

Rule 4.4.2 reflects APX Business Rule 7.6.2.

Part 4.5 Engaging in conduct as a Representative

Rule 4.5.1 Restrictions on allowing Representative action

Rule 4.5.1 provides that a Market Participant must not permit a person to do an act or engage in conduct in relation to the Market as a Representative of a Market Participant unless the person is:

(a) a Supervising Manager of the Market Participant;

(b) an employee of the Market Participant; or

Rule 4.5.1 reflects APX Business Rule 7.9.2.

Part 4.6 Client Orders - Precedence

Rule 4.6.1 Orders and beneficial ownership

Subrule 4.6.1(1) provides that, in Part 4.6 of the Rules, a reference to a Market Participant or Prescribed Person placing an order for its own account means that the Securities to be bought or sold are, or will be on the completion of part or all of the Order, beneficially owned by the Market Participant or Prescribed Person. Subrule 4.6.1(2) provides that for the purposes of subrule (1), the Securities beneficially owned by a Market Participant or Prescribed Person include Securities which would appear as assets on the balance sheet or consolidated balance sheet of that Market Participant or Prescribed Person.

Rule 4.6.1 reflects APX Business Rule 7.10.1.

Rule 4.6.2 Unexecuted orders

Subrule 4.6.2(1) provides that, subject to subrule (3), a Market Participant must not buy or sell Securities on its own account, or on the account of a Prescribed Person, while the Market Participant holds an unexecuted Order on the same terms from a client to deal in such Securities. Subrule 4.6.2(2) provides that, for the purpose of subrule (1), a limit Order which cannot be executed owing to price differences is not an uncompleted Order. Subrule 4.6.2(3) provides that subrule (1) does not apply to a Market Participant which confines its clients to professional investors and which executes each transaction to the best advantage of the professional investor.

Rule 4.6.2 reflects APX Business Rule 7.10.2.

Rule 4.6.3 Employee Accounts

Subrule 4.6.3(1) states that a Market Participant must ensure that no business is transacted on account of:

(a) an employee of a Market Participant; or

(b) an associate of any such employee; or

(d) any account in which any such employee has any interest either direct or indirect;

except with the prior written consent of a Director or the appointee of a Director of the Market Participant for each transaction. Subrule 4.6.3(2) provides that subrule (1) does not apply to business transacted on account of a Director of a Market Participant.

Rule 4.6.3 reflects APX Business Rule 7.10.3.

Rule 4.6.4 Market Participant must not preference own Order

Rule 4.6.4 provides that a Market Participant must not allocate a sale or purchase of Securities to fulfil all or part of an Order for a Prescribed Person or for its own account when it has an unfulfilled Order on the same terms for those Securities from a client which is not a Prescribed Person.

Rule 4.6.4 reflects APX Business Rule 7.10.5.

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