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ASX regulatory framework

ASX operates liquid, transparent, reliable markets of integrity where its activities are overseen by local and international regulators.

About the ASX regulatory framework

Australia operates in a highly regulated environment overseen by two independent Australian government agencies – the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA).

The Committee on Payments and Market Infrastructures (CPMI) and the Technical Committee of the International Organisation of Securities Commissions (IOSCO) are responsible for the establishment of the broad international standards for the regulation and conduct of clearing and settlement facilities. These are set out in the CPMI-IOSCO Principles for Financial Market Infrastructures.

ASX has received certain trading or market operating recognition or authorisation from a number of international regulators and is required to comply with certain regulatory obligations issued by those international authorities in order to maintain authorisation.

Regulatory authorities

Government regulators have extensive powers to enforce the laws and regulations that govern financial markets in Australia and overseas.

Confidence in the operation of the companies within ASX Group is reinforced by the whole-of-market regulation undertaken by ASIC across all trading venues and clearing and settlement facilities, as well as the financial system stability oversight by the RBA of ASX’s clearing and settlement facilities. ASIC also supervises ASX’s own compliance with the ASX Listing Rules as a listed company.

Additional responsibility for regulation of the Australian financial system lies with Treasury and APRA. Together with ASIC and the RBA, these four entities comprise the Council of Financial Regulators in Australia.

The Australian Securities and Investments Commission

ASIC is responsible for the supervision of real-time trading on Australia’s domestic markets, including those operated by ASX Group, and for enforcing the laws against misconduct on Australia’s financial markets, as well as supervising Australian Financial Service Licence (AFSL) holders.

The Reserve Bank of Australia

The RBA has responsibility for assessing whether licensed clearing and settlement facilities, including those operated by ASX Group, have complied with the RBA’s Financial Stability Standards (“FSS”) and done all other things necessary to reduce systemic risk. 

Treasury

The Department of the Treasury is an Australian Federal Government department which develops economic policy. Treasury works with the RBA, ASIC and APRA on the Council of Financial Regulators.

The Australian Prudential Regulatory Authority

APRA is the prudential regulator of the Australian financial services industry and is a member of the Council of Financial Regulators.

Council of Financial Regulators

CFR is the coordinating body for Australia’s main financial regulatory agencies. Its members are the RBA (Chair), ASIC, APRA and Treasury.

CFR’s role is to contribute to the efficiency and effectiveness of financial regulation, and promote the stability of the Australian financial system. CFR also provides advice to the Federal Government on the adequacy of Australia’s financial regulatory arrangements.

ASX has received certain trading or market operating recognition or authorisation from a number of international regulators and is required to comply with certain regulatory obligations issued by those international authorities in order to maintain authorisation.

The below list is distinct from the Clearing and Settlement Regulatory Obligations arising from international clearing or settlement-related authorisations.

Monetary Authority of Singapore (MAS) - Singapore

ASX and ASX 24 are Recognised Market Operators in Singapore. ASX is authorised to operate a securities market and ASX 24 is authorised to operate a market in respect of futures contracts.

Securities and Futures Commission (SFC) - Hong Kong 

In Hong Kong, ASX and ASX 24 are approved to provide automated trading services across ASX Trade, SYCOM (now NTP) and Genium Clearing.

Securities and Exchange Commission (SEC) - USA

ASX has no action relief from the SEC which enables it to familiarise certain broker-dealers and large financial institutions in the US with equity options and index options and enable ASX participants to accept orders for such products from such institutional clients.

ASX also has no action relief to enable certain US companies to list on ASX.

Additionally, Austraclear is authorised to act as a foreign depository for US investors.

Commodity Futures Trading Commission (CFTC) - USA

ASX has relief from US regulations to allow designated ASX participants to trade certain ASX futures and options products in the US. It also has permission to enable the offer and sale in the US of futures contracts based on the S&P/ASX 200 index and S&P ASX 50 index.

ASX 24 has relief to enable certain ASX 24 products to be offered in the US, for SYCOM to be made available in US and for designated ASX 24 participants to trade ASX 24 products in the US.

Financial Conduct Authority (FCA) - United Kingdom

ASX 24 has received Recognised Overseas Investment Exchange approval in the United Kingdom.

Financial Markets Authority (FMA) - New Zealand
ASX 24 has New Zealand Financial Product Market Licence approval in New Zealand.

Financial Market Supervisory Authority (FINMA) - Switzerland
ASX 24 has foreign trading venue recognition in Switzerland.

ASX's Corporations Act obligations

As a licensed operator of markets and clearing and settlement facilities in Australia, ASX has various regulatory obligations under the Corporations Act 2001 (Cth).

Fair, orderly and transparent

As a market operator, ASX is required to ensure that each of its licensed markets is fair, orderly and transparent.
In satisfying its obligation to operate a market that is:

  • fair, ASX has in place a clear rule framework setting out the criteria and processes to become a participant in ASX’s market or to be admitted to ASX’s official list; the rights and obligations once admitted; and the circumstances when a participant or listed entity can be suspended or terminated.

ASX also has arrangements in place to ensure that these rules are applied in a consistent manner, without bias.

  • orderly, ASX has clear rules and processes on:
    • how and when buy and sell orders are matched so that prices on its markets reflect genuine supply and demand;
    • corrections or cancellations of trading errors;
    • applications of halts (regulatory or trading); and,
    • the actions ASX can take to avoid or rectify a disorderly market.

In addition, ASX has trading systems that are secure, reliable and have sufficient capacity to handle reasonably foreseeable peak levels of trading.

  • transparent, ASX has arrangements in place to provide participants with timely information about prices and volume to enable them to make informed trading decisions. These arrangements also cover the circumstances when ASX may consider cancelling or correcting a trading error; suspending trading in a particular stock; or in a more extreme case, shutting the market.

For more information on how the ASX group interprets its obligation to ensure that each of its licensed markets is fair, orderly and transparent, see here.

Fair and effective

As a clearing and settlement (“CS”) facilities operator, ASX is required to ensure that each of its licensed CS facilities is fair and effective.
In satisfying its obligation to operate a CS facility that is:

  • fair, ASX has in place a clear rule framework setting out the criteria and processes to become a clearing and / or settlement participant in ASX’s market; the rights and obligations once admitted and when a participant can be suspended or terminated.

ASX also has arrangements in place to ensure that these rules are applied in a consistent manner, without bias.

  • effective, ASX has clear rules and processes that set out how participants meet their obligations to each other within the timeframes specified.

In addition to systems that are secure and reliable, ASX has a risk management system that appropriately deals with default and other risks, including systemic risk, counterparty risk, market risk, liquidity risk and operational risk.

For more information on how the ASX group interprets its obligation to ensure that each of its CS facilities are provided in a fair and effective way, see here.
 

Other Regulatory Obligations

ASX also has regulatory obligations:

  • to have adequate arrangements for managing conflict between its commerical interests and its FOT and FE obligations.

See 'Corporations Act' within ASX's Conflict Handling Policy: 

  • to have adequate arrangements for monitoring and enforcing compliance with its Listing Rules
  • to have adequate arrangments for monitoring and enforcing compliance with its other Operating Rules

The docments below explain how ASX meets these regulatory obligations.

Supporting information

Clearing and settlement regulatory obligations

The Assistant Treasurer (the Minister) has primary responsibility for licensing clearing and settlement (CS) facilities operating in Australia and for granting exemptions from the requirement to hold a CS facility licence. The Minister has the power to disallow amendments to the operating rules of the CS facilities, which must be submitted by the CS facilities for ministerial review as soon as practicable after being made.

ASIC is the principal regulatory authority advising the Minister in relation to the exercise of functions and powers. ASIC assesses each CS facility licensee on its compliance with its licence obligations under the Corporations Act annually. The RBA determines the Financial Stability Standards (FSS), annually assesses CS facility licensees on their compliance with them and advises the Minister in relation to certain matters. The Department of Treasury advises the Minister on clearing and settlement policy.

Globally, the Committee on Payments and Market Infrastructures (CPMI) and the Technical Committee of the International Organisation of Securities Commissions (IOSCO) are responsible for the establishment of the broad international standards for the regulation and conduct of clearing and settlement facilities.