Treasury Laws Amendment (Transition of Chi-X to National Guarantee Fund) Regulations 2019

Administered by Department of the Treasury

Legislation au F2019L00374 Regulations Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Issued by authority of the Assistant Treasurer

Corporations Act 2001

Treasury Laws Amendment (Transition of Chi-X to National Guarantee Fund) Regulations 2019

The Corporations Act 2001 (the Act) provides for the regulation of corporations and financial markets, including in relation to the licensing of financial services markets.

Part 7.5 of the Act establishes the requirement for each licensed financial services market to have a compensation regime. If the market is a member of the Securities Exchange Guarantee Corporation (SEGC), then it is covered by the National Guarantee Fund (NGF).

Section 1364 of the Act provides that the Governor-General may make regulations prescribing matters that are required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act. Section 891B of the Act provides that regulations may make provisions of a transitional nature in relation to a market that joins the SEGC (from the compensation regime previously applicable to it, to the arrangements constituted in respect of the NGF).

The purpose of the Treasury Laws Amendment (Transition of Chi-X to National Guarantee Fund) Regulations 2019 (the Amendment Regulations) is to amend the Corporations Regulations 2001 (the Corporations Regulations) to facilitate Chi-X’s transition to the NGF.

Currently, there is only one market covered by the NGF, being the Australian Securities Exchange (ASX). Chi-X has applied to become a member of the SEGC. When Chi-X becomes a member of the SEGC, it will also be covered by the NGF.

Schedule 1 to the Amendment Regulations clarifies the situations in which compensation may be claimed for a loss connected with Chi-X (or its subsidiary), where it is not connected with any other market covered by the NGF (namely, the ASX). It does this by specifying the transitional conditions that must be met in order to make a claim under the relevant heads of claim for the NGF set out in Division 4 of Part 7.5 of the Corporations Regulations.

Details of the Amendment Regulations are set out in Attachment A.

The Act does not specify any conditions that need to be met before the power to make the Amendment Regulations may be exercised.

The Amendment Regulations were released for public consultation from 21 February 2019 to 28 February 2019. One submission was received which was supportive of the amendments.

The Amendment Regulations are a legislative instrument for the purposes of the Legislation Act 2003.

The Amendment Regulations commence on the day after it is registered on the Federal Register of Legislation.  

A statement of Compatibility with Human Rights is at Attachment B.


ATTACHMENT A

Details of the Treasury Laws Amendment (Transition of Chi-X to National Guarantee Fund) Regulations 2019

Section 1 – Name of the Regulations

This section provides that the name of the Regulations is the Treasury Laws Amendment (Transition of Chi-X to National Guarantee Fund) Regulations 2019 (the Amendment Regulations).

Section 2 – Commencement

Schedule 1 to the Amendment Regulations commences the day after the instrument is registered on the Federal Register of Legislation.

Section 3 – Authority

The Amendment Regulations are made under the Corporations Act 2001 (the Act).

Section 4 – Schedule

This section provides that each instrument that is specified in the Schedules to this instrument will be amended or repealed as set out in the applicable items in the Schedules, and any other item in the Schedules to this instrument has effect according to its terms.

Schedule 1 – Amendments

Schedule 1 to the Amendment Regulations amends the Corporations Regulations 2001 (the Corporations Regulations) to support the transition of Chi-X Australia Pty Ltd (Chi-X) to the compensation arrangements under the National Guarantee Fund (NGF), subject to approval by the Securities Exchange Guarantee Corporation (SEGC). When Chi-X becomes a member of the SEGC, it will be covered by the NGF.

Schedule 1 to the Amendment Regulations sets out the transitional conditions for compensation to be claimed for a loss connected with Chi-X (and not connected with any other market covered by the NGF) under the relevant heads of claim for the NGF.

Item 1 – Transitional provision for joining of Chi-X

Item 1 inserts new regulation 7.5.85A into Division 4 of the Corporations Regulations (about the NGF), at the end of Subdivision 4.11 (about other provisions relating to compensation).

Item 1 provides that the Amendment Regulations are made for the purposes of section 891B of the Act, being the provision of the Act that sets out the power to make regulations of a transitional nature in relation to a joining market from the compensation arrangements previously applicable to it, to the compensation arrangements under the NGF.

Item 1 also provides that the Amendment Regulations apply to a financial market that is a ‘joining market’ (as defined in subsection 891B(1) of the Act) if both of the following conditions are satisfied:

•                 the financial market is operated by Chi-X or a subsidiary of Chi-X; and

•                 the joining day (being the date on which Chi-X becomes a member of the SEGC) is on or after the date of commencement of the Amendment Regulations.

The date on which Chi-X becomes a member of the SEGC will be published on the SEGC’s website.

Item 1 specifies that compensation is only claimable under the relevant heads of claim for the NGF in respect of a loss:

•                 connected with Chi-X (or a subsidiary of Chi-X); and

•                 not connected with any other financial market covered by the NGF,

if the transitional condition for that head of claim is met.

The transitional conditions are as follows:

•                 for the heads of claim in relation to contract guarantees (being regulations 7.5.24 to 7.5.27), the prescribed period for the relevant reportable transaction must end on or after the joining day;

•                 for the heads of claim in relation to unauthorised transfers (being regulations 7.5.54 and 7.5.55), the unauthorised execution must have occurred on or after the joining day; and

•                 for the heads of claim in respect of insolvent participants (being regulation 7.5.64), the dealer must have become insolvent on or after the joining day.

These transitional conditions do not affect the current operation of the NGF, prior to the commencement of the Amendment Regulations. In particular, the transitional conditions do not affect claims that are currently covered by the NGF – such as claims that are connected to ASX and claims that are connected to both the Australian Securities Exchange and Chi-X. 

 


ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Treasury Laws Amendment (Transition of Chi-X to National Guarantee Fund) Regulations 2019

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

Schedule 1 to this Legislative Instrument amends the Corporations Regulations 2001 (the Corporations Regulations) to clarify the situations in which compensation may be claimed for a loss connected with Chi-X Australia Pty Ltd (or its subsidiary) under the National Guarantee Fund (NGF), where the loss is not connected with any other market covered by the NGF (namely, the Australian Securities Exchange). It does this by specifying the transitional conditions that must be met in order to make a claim under the relevant heads of claim for the NGF set out in Division 4 of Part 7.5 of the Corporations Regulations.

The Legislative Instrument does not abrogate any existing rights to compensation under the NGF.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

 

Overview

The Treasury Laws Amendment (Transition of Chi-X to National Guarantee Fund) Regulations 2019 were enacted to facilitate the transition of Chi-X Australia Pty Ltd, a financial services market, to the National Guarantee Fund (NGF). The primary purpose of these regulations is to amend the Corporations Regulations 2001 to clarify the conditions under which compensation may be claimed for losses related to Chi-X, ensuring that such claims are distinct from those associated with the Australian Securities Exchange (ASX), which is the only other market currently covered by the NGF. This regulatory amendment was made under the authority of the Corporations Act 2001, which governs the regulation of corporations and financial markets in Australia. The policy objective behind these regulations is to support the orderly transition of Chi-X into the NGF, thereby providing a consistent compensation framework across all participating markets. The regulations were subject to public consultation, receiving one supportive submission, and they come into effect on the day following their registration on the Federal Register of Legislation.

Scope and Application

The Treasury Laws Amendment (Transition of Chi-X to National Guarantee Fund) Regulations 2019, made under the Corporations Act 2001, facilitate the transition of Chi-X Australia Pty Ltd to the National Guarantee Fund (NGF) by amending the Corporations Regulations 2001. These Amendment Regulations apply to a financial market operated by Chi-X or its subsidiary if Chi-X becomes a member of the Securities Exchange Guarantee Corporation on or after the regulations' commencement date. The primary objective is to clarify the conditions under which compensation can be claimed for losses connected with Chi-X that are not associated with any other market covered by the NGF, such as the Australian Securities Exchange (ASX). Specifically, the Amendment Regulations set out transitional conditions for claims related to contract guarantees, unauthorised transfers, and insolvent participants, ensuring that compensation is only claimable if certain criteria are met post the transition date. This legislative instrument does not affect existing compensation claims under the NGF but ensures a smooth transition for Chi-X as it joins the NGF.

Key Provisions

The Treasury Laws Amendment (Transition of Chi-X to National Guarantee Fund) Regulations 2019 (Amendment Regulations) primarily amend the Corporations Regulations 2001 to facilitate the transition of Chi-X Australia Pty Ltd (Chi-X) to the National Guarantee Fund (NGF). Section 891B of the Corporations Act 2001 (the Act) allows for regulations of a transitional nature in relation to a market that joins the Securities Exchange Guarantee Corporation (SEGC). Section 1364 of the Act enables the Governor-General to make regulations that are necessary or convenient to carry out or give effect to the Act. The Amendment Regulations were designed to address the specific circumstances of Chi-X joining the NGF and aim to ensure a smooth transition for the financial market operated by Chi-X. The Amendment Regulations impose specific transitional conditions for claiming compensation under the NGF for losses connected with Chi-X or its subsidiaries, provided these losses are not connected with any other market covered by the NGF, such as the Australian Securities Exchange (ASX). Compensation can only be claimed if the relevant transitional conditions are met, such as the prescribed period for a reportable transaction ending after Chi-X becomes a member of the SEGC or the unauthorised execution occurring after the joining day. The regulations ensure that the NGF's current operation remains unaffected and do not alter existing claims that are already covered by the NGF. Under the Amendment Regulations, there are civil consequences for non-compliance with the transitional conditions set out for claiming compensation under the NGF. If a claim is made that does not meet the specified transitional conditions, it will not be eligible for compensation. Additionally, any misrepresentation or failure to disclose relevant information in relation to a claim could lead to civil proceedings for fraud or misrepresentation. The Amendment Regulations do not specify penalties for such breaches but highlight the importance of adhering to the transitional conditions to ensure valid claims are processed. The Amendment Regulations do not include specific offences or criminal penalties for breaches related to the transitional conditions for claiming compensation under the NGF. However, any fraudulent activity or misrepresentation in the context of making a claim could potentially result in criminal charges under other relevant sections of the Corporations Act. The primary focus of the Amendment Regulations is to clarify the eligibility criteria for compensation claims during the transition period and to ensure that claims are handled in accordance with the specified conditions.

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Area of Law
Corporate Law & Governance
Financial Law
Instrument
Regulation
Concepts
Definitions & Interpretation
Transitional Provisions
Regulatory Standards

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.