ASIC Market Integrity Rules (Securities Markets) Class Waiver 2018/303

Overview

The ASIC Market Integrity Rules (Securities Markets) Class Waiver 2018/303 was enacted in 2018 and is a legislative instrument made under the authority of the Australian Securities and Investments Commission (ASIC) to provide specific relief for market participants involved in securities markets. This waiver aims to address the need for flexibility in certain regulatory requirements to facilitate market operations while maintaining integrity and protecting market participants, particularly in the context of derivatives market contracts. The primary objective of this waiver is to exempt certain market participants from specific compliance obligations under Rule 3.4.1 of the ASIC Market Integrity Rules (Securities Markets) 2017, provided certain conditions are met, thereby streamlining transactions for non-retail clients in the derivatives market. The waiver, which is effective from 1 May 2018, allows market participants to forgo certain requirements of Rule 3.4.1 if the client is not a retail client, the transaction involves a derivatives market contract, and the participant has appropriately notified the client of the transaction's regulatory framework and market customs. This legislative instrument also imposes conditions, such as the need for record-keeping of client notifications, to ensure transparency and accountability in market activities. The relief provided by this waiver is set to remain in effect until 30 November 2023, subject to any amendments made during this period.

Scope and Application

The ASIC Market Integrity Rules (Securities Markets) Class Waiver 2018/303 applies to Market Participants, specifically those who are not dealing with retail clients and are engaged in Market transactions involving financial products classified as Derivatives Market Contracts. The waiver exempts these Market Participants from certain compliance requirements stipulated in Rule 3.4.1 of the ASIC Market Integrity Rules (Securities Markets) 2017, provided that they notify their clients of their adherence to market operator directions, the Rules, market operating rules, Clearing Rules, Settlement Rules, and market customs and practices, along with the correction of errors and omissions, prior to executing trades on behalf of the client. This waiver is effective across the Commonwealth of Australia and is subject to specific conditions and a limited duration, expiring at the end of 30 November 2023. Any changes or extensions to the waiver may be implemented through subordinate instruments, subject to the legislative framework governing such modifications.

Key Provisions

The ASIC Market Integrity Rules (Securities Markets) Class Waiver 2018/303, as compiled and in force on 25 January 2022, primarily focuses on providing a waiver from certain compliance requirements for Market Participants in specific circumstances. Under section 5 of the instrument, a Market Participant is exempt from complying with Rule 3.4.1 of the ASIC Market Integrity Rules (Securities Markets) 2017, provided that the client is not a retail client, the market transaction pertains to a financial product that is a Derivatives Market Contract, and the Market Participant has duly notified the client before entering a Trading Message on their behalf. This notification must include details that the market transactions will be subject to the directions, decisions, and requirements of the Market operator, the ASIC Market Integrity Rules, the operating rules of the Market, the Clearing Rules, the Settlement Rules, and the customs and usages of the Market. Additionally, the notification must inform the client that errors and omissions will be corrected. In order to avail of this waiver, the Market Participant must adhere to the conditions outlined in section 6, which requires them to maintain a record of the notification provided to the client. The effectiveness of the waiver is contingent upon compliance with these conditions, as stipulated in subrule 1.2.1(2) of the Rules. Furthermore, the waiver is applicable only until the end of 30 November 2023, as specified in section 7 of the instrument. It is important to note that the waiver history and amendment history are detailed in the endnotes, providing a comprehensive understanding of the instrument's development and changes over time. The ASIC Market Integrity Rules (Securities Markets) Class Waiver 2018/303 imposes certain obligations and requirements on Market Participants. Firstly, Market Participants must ensure that the clients they deal with are not retail clients, and that the market transactions pertain specifically to Derivatives Market Contracts. Secondly, Market Participants are required to notify their clients about the compliance requirements and market rules that will govern their transactions. This notification must be made before entering a Trading Message on the client's behalf and must include information about the Market operator's directions, decisions, and requirements, as well as the customs and usages of the Market. Additionally, Market Participants must maintain a record of the notification provided to the client, as stipulated in section 6 of the instrument. Failure to comply with the provisions of the ASIC Market Integrity Rules (Securities Markets) Class Waiver 2018/303 may result in various consequences, including both civil and criminal penalties. Although the specific penalties are not outlined in the instrument itself, they can be found in the ASIC Market Integrity Rules (Securities Markets) 2017. Market Participants who do not adhere to the requirements of the waiver may face enforcement actions, fines, or other sanctions as determined by the Australian Securities and Investments Commission (ASIC). Additionally, non-compliance with the market rules and regulations may lead to disciplinary actions against the Market Participant or their representatives, further highlighting the importance of adhering to the provisions of the waiver and the underlying rules.