Corporations (Foreign Exchange Markets) Exemption Notice 2004
I, ROSS CAMERON, Parliamentary Secretary to the Treasurer, issue this Notice under section 791C of the Corporations Act 2001.
Dated 9 March 2004
ROSS CAMERON
Parliamentary Secretary to the Treasurer
1 Name of Notice
This Notice is the Corporations (Foreign Exchange Markets) Exemption Notice 2004.
2 Commencement
This Notice commences on 11 March 2004.
3 Expiry
This Notice ceases to have effect at the end of 10 March 2005.
4 Definitions
In this Notice:
foreign entity means an entity that has its principal place of business in a foreign country.
overseas regulatory authority means a regulatory authority or self‑regulatory organisation in a foreign country whose regulatory responsibilities include regulation of the provision of financial services in the foreign country.
Note Foreign country is defined in paragraph 22 (1) (f) of the Acts Interpretation Act 1901.
5 Application
This Notice applies to a financial market if:
(a) the market operates in Australia and in a foreign country; and
(b) each of the participants in the market is:
(i) a professional investor or a wholesale client; or
(ii) a foreign entity that is registered or licensed by an overseas regulatory authority; or
(iii) a foreign entity that:
(A) is carrying on a financial services business in the foreign country in which the entity’s principal place of residence is located; and
(B) is not required to be registered or licensed by an overseas regulatory authority in that country when providing financial services in that country; and
(c) only foreign exchange contracts, derivatives in relation to foreign exchange contracts and derivatives in relation to the value of a currency or the value at which a currency may be exchanged for another are dealt on the market; and
(d) the operator of the market has notified ASIC in writing that the operator relies on this exemption.
6 Exemption
For section 791C of the Corporations Act 2001, and subject to the conditions mentioned in sections 7 to 10, a foreign exchange market to which this Notice applies is exempt from the operation of Part 7.2 of that Act.
7 Regulation
The foreign exchange market, or the operator of the market, must be:
(a) regulated as a financial market, or exempt from regulation as a financial market, under a law of a foreign country in which the market operates; or
(b) not required, under a law of a foreign country in which the market operates, to be regulated as a financial market by a body responsible for the regulation of financial markets in the foreign country.
8 Participants in the market
The majority of the participants in the foreign exchange market must not have their principal place of business in Australia.
9 Clearing and settlement arrangements
The operator of the foreign exchange market:
(a) must not operate a clearing and settlement facility for the market; and
(b) may provide clearing and settlement arrangements for the market only by providing information and establishing procedures for the settlement of transactions effected through the market.
10 Providing assistance to ASIC
If ASIC asks the operator of the foreign exchange market about:
(a) the total trading volume originating from Australian participants for a particular period; or
(b) the proportion of the worldwide trading volume on the market that was conducted by Australian participants for that period; or
(c) the current name and business address in Australia for each Australian participant;
the operator must, as soon as practicable after receiving the request, give ASIC all information that is reasonably available about the matter.
Overview
The Corporations (Foreign Exchange Markets) Exemption Notice 2004 was issued by ROSS CAMERON, the Parliamentary Secretary to the Treasurer, under section 791C of the Corporations Act 2001. This Notice, which came into effect on 11 March 2004 and expired on 10 March 2005, was designed to address the need for exempting certain foreign exchange markets from the provisions of Part 7.2 of the Corporations Act 2001. The policy objective behind this Notice is to facilitate the operation of foreign exchange markets in Australia under specific conditions, ensuring they are regulated appropriately under foreign laws and do not require additional oversight by the Australian Securities and Investments Commission (ASIC) provided certain criteria are met. This includes markets that operate in both Australia and a foreign country, with participants who are either professional investors, wholesale clients, or foreign entities regulated by an overseas authority.
Scope and Application
The Corporations (Foreign Exchange Markets) Exemption Notice 2004 applies to foreign exchange markets that operate in both Australia and a foreign country, provided they meet specific conditions. The Notice exempts such markets from certain sections of the Corporations Act 2001, provided that participants in the market are either professional investors, wholesale clients, or foreign entities registered or licensed by an overseas regulatory authority. Additionally, the market must exclusively deal in foreign exchange contracts, derivatives related to foreign exchange, and derivatives related to the value of a currency or exchange rates. For the exemption to apply, the market's operator must notify the Australian Securities and Investments Commission (ASIC) in writing that they are relying on this exemption. The exemption is also contingent upon the foreign exchange market being regulated or exempt from regulation under the laws of the foreign country in which it operates, and that the majority of the participants in the market do not have their principal place of business in Australia. Furthermore, the operator of the market must not operate a clearing and settlement facility and can only provide clearing and settlement arrangements through information and established procedures.
Key Provisions
The Corporations (Foreign Exchange Markets) Exemption Notice 2004 (sections 5 to 10) provides specific conditions under which foreign exchange markets operating in Australia and another country may be exempt from certain parts of the Corporations Act 2001. The Notice applies to financial markets that exclusively deal in foreign exchange contracts, derivatives relating to foreign exchange, and currency value derivatives. The exemption is subject to the market being regulated or exempt from regulation in the foreign country where it operates, and it requires that the majority of participants in the market must not have their principal place of business in Australia. Furthermore, the market operator must not operate a clearing and settlement facility but may provide necessary information and procedures for settling transactions.
Under this Notice, the parties involved, including the market operator and participants, must comply with several obligations. The market must be regulated or exempt from regulation under the law of the foreign country where it operates, and it must ensure that most participants are based outside Australia. The operator of the market is also required to provide information to the Australian Securities and Investments Commission (ASIC) when requested, specifically regarding trading volumes from Australian participants and the details of those participants. These obligations are crucial to maintaining the integrity and oversight of the market within the legislative framework.
Failure to comply with the requirements set out in the Notice can result in significant consequences. Although the Notice itself does not explicitly state penalties, breaches of the Corporations Act 2001 or related regulations can lead to enforcement actions by ASIC. These actions may include fines, legal proceedings, and other regulatory sanctions. The severity of the penalties depends on the nature and extent of the breach, but they can be substantial, reflecting the importance of adhering to financial market regulations.