ASIC Market Integrity Rules (Securities Markets) Amendment 2022/73
About this compilation
Compilation No. 1
This is a compilation of ASIC Market Integrity Rules (Securities Markets) Amendment 2022/73 as in force on 9 June 2022. It includes any commenced amendment affecting the legislative instrument to that date.
This compilation was prepared by the Australian Securities and Investments Commission.
The notes at the end of this compilation (the endnotes) include information
about amending instruments and the amendment history of each amended provision.
Contents
Part 1—Preliminary
1 Name of legislative instrument
2 Commencement
3 Authority
4 Schedules
5 Repeal of amending and repealing instruments
Schedule 1—Amendments to ASIC Market Integrity Rules (Securities Markets) 2017
ASIC Market Integrity Rules (Securities Markets) 2017
Endnotes
Endnote 1—Instrument history
Endnote 2—Amendment history
Part 1—Preliminary
1 Name of legislative instrument
This is the ASIC Market Integrity Rules (Securities Markets) Amendment 2022/73.
2 Commencement
This instrument commences on 10 June 2022.
3 Authority
This instrument is made under s798G(1) of the Corporations Act 2001.
4 Schedules
Each instrument that is specified in a Schedule to this instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms.
5 Repeal of amending and repealing instruments
(1) The repeal of an instrument by section 4 does not affect any amendment to or repeal of another instrument (however described) made by the instrument.
(2) Subsection (1) does not limit the effect of section 7 of the Acts Interpretation Act 1901 as it applies to the repeal of an instrument by section 4 of this instrument.
Schedule 1—Amendments
ASIC Market Integrity Rules (Securities Markets) 2017
1 Subrule 5.4B.1(1)
Omit the subrule, substitute:
“(1) Where a Market Participant handles or executes an Order as a result of an arrangement with another person (the other person) to direct Orders to the Market Participant, the Market Participant:
(a) must not, indirectly or directly, make a cash payment to the other person or an associate of the other person for the opportunity to handle or execute those Orders, if the cash payment is greater than the dollar value of the Market Participant’s Commission in relation to the Orders; and
(b) must take reasonable steps to ensure that the other person has not, indirectly or directly, made a cash payment to a third party (the third party) or an associate of the third party to procure the handling or execution of Orders from the third party or a client of the third party, if the cash payment is greater than the dollar value of any payment made, or to be made, by the third party (including a payment made, or to be made, by a client of the third party) to the other person, for directing the Orders to the other person.”
2 Subrule 5.4B.1(2)
Omit the subrule, substitute:
“(2) For the purposes of subrule (1):
associate of the other person or third party includes any director, officer, employee or associated or related company of the other person or of the third party, as the case may be.
Market Participant’s Commission in relation to the Orders means the dollar value of any payment received, or to be received, by the Market Participant (including commission received, or to be received, from a client of the other person) for the opportunity to handle or execute the Orders.”
(3) Where a Market Participant directs an Order to another person (the other person) as a result of an arrangement for the Market Participant to direct Orders to the other person, the Market Participant must not, and must procure that its associates do not, indirectly or directly, accept a cash payment from the other person for directing Orders to the other person, if the cash payment is greater than the dollar value of any payment made, or to be made, by the Market Participant (including a payment made, or to be made, by a client of the Market Participant) to the other person, for directing the Orders to the other person.
(4) For the purposes of subrule (3), an associate of a Market Participant includes any director, officer, employee or associated or related company of the Market Participant.”
Endnotes
Endnote 1—Instrument history
Instrument number | Date of FRL registration | Date of commencement
(underlined = not yet commenced) | Application, saving or transitional provisions |
ASIC Market Integrity Rules (Securities Markets) Amendment 2022/73
(F2022L00292) | 09/03/2022 | Schedule 1: 10/06/2022 | |
ASIC Market Integrity Rules (Securities Markets and Futures Markets) Amendment Instrument 2022/329
(F2022L00751) | 08/06/2022 | 09/06/2022 | |
Endnote 2—Amendment history
ad. = added or inserted am. = amended LA = Legislation Act 2003 rep. = repealed rs. = repealed and substituted underlined = not yet commenced
Provision affected | How affected |
Section 2 | am. F2022L00751, Schedule 1, item [1] rep. s48D LA |
Section 2 (Note) | rep. F2022L00751, Schedule 1, item [2] |
Overview
The ASIC Market Integrity Rules (Securities Markets) Amendment 2022/73 was enacted to address gaps in the integrity and transparency of securities markets. This amendment, which came into force on 10 June 2022, was made under section 798G(1) of the Corporations Act 2001 by the Australian Securities and Investments Commission (ASIC). The policy objective of this amendment is to strengthen market integrity by prohibiting certain cash payments related to the handling or execution of orders in securities markets, ensuring that market participants and their associates do not engage in practices that could undermine the fairness and efficiency of the market.
The amendment targets specific arrangements where market participants handle or execute orders as a result of agreements with other parties, prohibiting any cash payments that exceed the market participant's commission. It also mandates that market participants take reasonable steps to ensure that other parties in the arrangement have not made similar excessive cash payments. The aim is to prevent conflicts of interest and ensure that market participants operate in a transparent and fair manner, thereby maintaining the integrity of the securities markets.
Scope and Application
The ASIC Market Integrity Rules (Securities Markets) Amendment 2022/73 is an amendment to the existing ASIC Market Integrity Rules (Securities Markets) 2017, introduced to enhance market integrity within Australia's securities markets. This legislative instrument applies to market participants, including financial institutions, brokers, and other entities involved in securities trading, ensuring they adhere to strict standards of conduct. The amendment's primary focus is on prohibiting certain cash payments related to order handling and execution, particularly those that exceed the dollar value of commissions or payments made in relation to the orders. This amendment aims to curb practices that could potentially distort market competition or fairness. Geographically, the application of this amendment is national, impacting all securities markets within Australia, including those operating in various states and territories. The amendment does not explicitly state exclusions or exemptions but operates under the overarching framework of the Corporations Act 2001, suggesting that any existing exemptions under that act would continue to apply. Subordinate instruments may further extend or restrict the application of these rules, ensuring they adapt to evolving market practices and emerging issues.
Key Provisions
The ASIC Market Integrity Rules (Securities Markets) Amendment 2022/73 introduces significant changes to the existing ASIC Market Integrity Rules (Securities Markets) 2017, effective from 10 June 2022. The primary amendments are found in Schedule 1, which modifies the rules to enhance transparency and prevent conflicts of interest among market participants. Specifically, subrule 5.4B.1(1) is amended to prohibit market participants from making cash payments to others for directing orders if the payment exceeds the participant's commission. Similarly, subrule 5.4B.1(2) updates the definition of terms such as 'associate' and 'Market Participant's Commission' to clarify the scope of the prohibition. Furthermore, subrule 5.4B.1(3) adds a requirement for market participants to ensure that their associates do not accept such payments, and subrule 5.4B.1(4) specifies the definition of 'associate' for this purpose.
This legislation imposes stringent obligations on market participants, including the necessity to avoid any form of cash payments that could be interpreted as kickbacks or inducements. Market participants must take proactive steps to investigate and ensure that neither they nor their associates receive any cash payments that exceed the fair value of their commission for directing orders. These obligations are designed to maintain the integrity and fairness of securities markets by preventing practices that could distort market outcomes or compromise the independence of market participants. The amended rules also necessitate that market participants clearly define and understand the relationships that constitute 'associates,' ensuring that all relevant parties comply with the new standards.
Breach of these amended provisions can lead to significant consequences. While the specific penalties are not detailed in the legislative instrument, violations of financial market regulations typically result in both civil and criminal penalties under the Corporations Act 2001. Civil penalties can include substantial fines, which may be up to several hundred thousand dollars, depending on the severity and frequency of the breach. Criminal penalties may also be imposed, potentially leading to imprisonment for individuals found guilty of serious violations. Additionally, regulatory actions may include public reprimands, suspension, or revocation of licenses, further impacting the market participant's ability to operate within the securities markets.