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Code of practice

ASX’s core commitments include providing transparent and non-discriminatory pricing of and access to its CS services, protecting the confidential information of users, and establishing mechanisms for meaningful user input into the development of cash equity CS services.

In September 2017 the Council of Financial Regulators released an update to the ‘Regulatory Expectations for the Conduct of Cash Equity Clearing and Settlement Services in Australia’ (Regulatory Expectations).

The Regulatory Expectations provide a framework for ASX’s conduct in operating its cash equities clearing and settlement services while it remains the sole provider of these services.  They relate to key governance, pricing and access matters.

The ASX Cash Equities Clearing and Settlement Code of Practice sets out ASX’s commitment to comply with the Regulatory Expectations, and its commitments to customers and other stakeholders in managing cash equities clearing and settlement infrastructure and services for the Australian market.

ASX’s core commitments under the Code of Practice include providing transparent and non-discriminatory pricing of and access to its CS services, protecting the confidential information of users, and establishing mechanisms for meaningful user input into the development of cash equity CS services.  ASX has also made additional commitments, including to retain at least 50% non-executive directors on the Boards of ASX Clear and ASX Settlement who are independent of ASX Limited.

Council of Financial Regulators - Competition in Cash Equity Clearing and Settlement

On 12 October 2016, the then Treasurer, the Hon Scott Morrison MP, announced the release of two policy statements by the Council of Financial Regulators on clearing and settlement for the cash equity market:

  • Regulatory Expectations for Conduct in Operating Cash Equity Clearing and Settlement Services in Australia (Regulatory Expectations)
  • Minimum Conditions for Safe and Effective Competition in Cash Equity Clearing in Australia (Minimum Conditions)

The development of the two policy statements by the Council of Financial Regulators was endorsed by the Government as part of its announcement on cash equities clearing competition on 30 March 2016. The Treasurer announced a reform package that would be developed to provide the path for competition in cash market clearing. The Treasurer also released the Council of Financial of Regulators’ ‘Review of Competition in Clearing Australian Cash Equities: Conclusions’ (CFR Review Conclusions Paper).  The Council of Financial Regulators’ review was commenced in February 2015 with the release of the Consultation Paper ‘Review of Competition in Clearing Australian Cash Equities'

In March 2017, the Council of Financial Regulators and the Australian Competition and Consumer Commission released a consultation paper, ‘Safe and Effective Competition in Cash Equity Settlement in Australia’. Following this consultation the agencies released a policy statement setting out minimum conditions for safe competition in cash equities settlement and also made minor and consequential changes to update the Regulatory Expectations and Minimum Conditions (Clearing). The updated documents can be found at https://www.cfr.gov.au/news/2017/mr-17-01.html.

The Council of Financial Regulators previously undertook a review of competition in cash equities clearing in 2012 (2012 Review).  The 2012 Review recommended to government that a decision on any licence application from central counterparty seeking to compete in the Australian cash equity market be deferred for a period of two years.  The 2012 Review also recommended that ASX be encouraged to work with industry to develop a Code of Practice.  The government endorsed the recommendations of the 2012 Review in February 2013. 

Public consultation

In December 2014, ASX consulted on proposed operational improvements to the Code of Practice for Clearing and Settlement of Cash Equities in Australia (Code of Practice).  This consultation was undertaken ahead of the review of the market structure for cash market clearing by regulators and Government.

ASX identified a small number of operational improvements to increase the effectiveness and efficiency of the Code of Practice following its first year of operation.  The operational improvements related to the frequency of meetings of advisory mechanisms established by ASX under the Code of Practice (the Forum and the Business Committee), and measures to simplify the administration of the Code of Practice.

Consultation on the TAS and SFS

In accordance with its Code of Practice commitments, ASX consulted in H1 2014 on enhancements to its service level commitments and Information Handling Standards for the protection of confidential information, including conflict sensitive information, received in connection with the Trade Acceptance Service (TAS) and the Settlement Facilitation Service (SFS).  ASX also consulted on the operational and technical standards / procedures for the Trade Acceptance Service and the Settlement Facilitation Service.

In response to the Consultation Paper Clearing and Settlement Services for Approved Market Operators and Approved Listing Market Operators: enhanced service levels and information handling standards, ASX received written submissions from Chi X Australia (Chi X) and Asia Pacific Stock Exchange (APX).  

Background to the development of the Code

In developing the Code, ASX undertook a comprehensive public consultation process involving a call for written submissions and over 40 bilateral consultation meetings, 2 industry briefing sessions in Sydney and Melbourne and roundtables with the members of the Australian Financial Markets Association (AFMA) and Stockbrokers Association of Australia (SAA).

On 10 April 2013, a draft Code of Practice for Clearing and Settlement of Cash Equities in Australia (draft Code) was released for comment.

A range of consultation meetings were held with interested stakeholders in Sydney and Melbourne throughout April and early May. Industry briefings were held on 17 April 2013 in Sydney and 22 April 2013 in Melbourne.

Consultation roundtables were held with members of the Australian Financial Markets Association (AFMA) in Sydney on 29 April 2013 and with members of the Stockbrokers Association of Australia (SAA) in Sydney on 6 May 2013.

The consultation period formally closed on 8 May 2013.  ASX received 10 written submissions, 2 of which were provided on a confidential basis.  The non-confidential submissions are available below.

The consultation feedback demonstrated strong support for the draft Code and the establishment of an advisory forum (the Forum) to provide user input to the Boards of ASX Clear and ASX Settlement.  

Consultation feedback has been incorporated into the final version of the Code

Revisions to the draft Code following consultation

The draft Code exposed for comment on 10 April 2013 was revised to incorporate a number of changes to address consultation feedback.

ASX received 10 written submissions in 2013 on the draft Code. Two submissions were provided on a confidential basis. The non-confidential submissions received are as follows. The submissions are in alphabetical order by name of the entity making the submission.

No.   Organisation  Date Received  Pages
1. Australian Custodial Services Association 09/05/2013 2
2. Australian Financial Markets Association 08/05/2013 2
3. Association of Superannuation Funds of Australia 08/05/2013 3
4. Commonwealth Bank of Australia Group Participants 08/05/2013 3
5. Chi X Australia 14/05/2013 6
6. Computershare 08/05/2013 1
7. Stockbrokers Association of Australia 09/05/2013 3

External Audits of ASX’s Compliance with the Regulatory Expectations

In the ‘Regulatory Expectations for Conduct in Operating Cash Equity Clearing and Settlement Services in Australia’ (CFR Policy Statement), there is a requirement for ASX to commit to submitting an annual external audit of its governance, pricing and access arrangements against the Regulatory Expectations.  In the Code of Practice, ASX committed to annually commission an external audit of its compliance with the Regulatory Expectations to be conducted by an independent assurance firm.

External audit: Year Ended 30 June 2020

The first audit of ASX’s compliance with the Regulatory Expectations since the Council of Financial Regulators (CFR) released the Regulatory Expectations in October 2016 was released in 2017.  Prior to the release of the Regulatory Expectations, ASX has been subject to an independent annual audit in relation to its compliance with the Code of Practice for Cash Equities Clearing and Settlement in Australia for financial years 2014, 2015 and 2016.

PwC undertook a fourth reasonable assurance audit in relation to ASX’s compliance with the Regulatory Expectations in accordance with the Australian Standard on Assurance Engagement 3100 – Compliance Engagements issued by AAASB for the year ended 30 June 2020.   PwC assessed ASX’s compliance with the Regulatory Expectations by reference to the Compliance Framework developed by ASX, which comprises the ASX Code of Practice and related policies and procedures.

The assurance report sets out PwC’s unqualified audit opinion that “ASX has complied, in all material respects, with the Regulatory Expectations as represented in the Compliance Framework for the year ended 30 June 2020.”