(1) A Market Participant must, in relation to its conduct, and that part of its business that it conducts, on or in relation to the APX Market, wherever the conduct occurs or the business is located and regardless of the number of offices operated or intended to be operated by the Market Participant, have appropriate management structures in place to ensure that:
(a) it has operations and processes in place that are reasonably designed, implemented, and that function, so as to achieve compliance by the Market Participant with these Rules and the Market Operating Rules;
(b) the design, implementation, functioning and review of those operations and processes are subject to the supervision of one or more Responsible Executives; and
(c) each Responsible Executive has sufficient seniority and authority within the Market Participant to exert control, leadership, influence and supervision over those operations and processes.
(2) A Market Participant must keep accurate records of its management structure and its allocation of responsibilities among its Responsible Executives.
Maximum penalty: $1,000,000
2.1.2 Notification of management structure
(1) Subject to subrule (4), a Market Participant that is a Market Participant as at the Commencement Date must give to ASIC a document that sets out its management structure and its allocation of its responsibilities among its Responsible Executives, within 10 Business Days of the Commencement Date.
(2) Subject to subrule (4), a Market Participant that was not a Market Participant as at the Commencement Date must give to ASIC a document that sets out its management structure and its allocation of its responsibilities among its Responsible Executives, within 10 Business Days of becoming a Market Participant.
(3) A Market Participant that has given to ASIC a document under subrule (1) or (2) must notify ASIC in writing, within 10 Business Days, of any significant change in the management structure or its allocation of its responsibilities among its Responsible Executives shown in that document.
(4) A Market Participant is not required to comply with subrule (1) or (2), and is taken for the purposes of subrule (3) to have given ASIC a document under subrule (1) or (2), where, at the time the obligation to comply with the relevant subrule would arise, all of the following are satisfied:
(a) the Market Participant is also an ASX Participant or a Chi-X Australia Participant;
(b) the Market Participant has given ASIC a document or set of documents that complies with either ASX Market Integrity Rule 2.1.2 or Chi-X Australia Market Integrity Rule 2.1.2;
(c) the Market Participant proposes to rely on the document or set of documents referred to in paragraph (b) for the purposes of complying with these Rules; and
(d) the Market Participant notifies ASIC in writing:
(i) that the Market Participant proposes to rely on the document or set of documents referred to in paragraph (b) for the purposes referred to in paragraph (c); and
(ii) of any significant change in the management structure or its allocation of its responsibilities among its Responsible Executives shown in that document or those documents.
A Market Participant must have appropriate supervisory policies and procedures to ensure compliance by the Market Participant and each person involved in its business as a Market Participant with these Rules, the Market Operating Rules and the Corporations Act.
Maximum penalty: $1,000,000
2.1.4 Persons involved in the business—Good fame and character requirement
(1) A Market Participant must ensure that any Employee or other person who is or will be involved in the business of the Market Participant in connection with the APX Market and, in the case of a body corporate, each director or Controller, is of good fame and character and high business integrity having regard to subrule (2).
(2) In assessing whether a person is of good fame and character and high business integrity for the purpose of subrule (1):
(a) a person will not be of good fame and character if he or she is disqualified from managing a corporation under the Corporations Act or under the law of another country, or is an insolvent under administration or its equivalent in another country; and
(b) a person may not be of good fame and character or high business integrity if the person has been:
(i) convicted of any offence;
(ii) disciplined or adversely mentioned in a report made by, or at the request of, any government or governmental authority or agency;
(iii) adversely mentioned in a report made by, or at the request of, the Market Operator, a Clearing Facility, a Settlement Facility or any other exchange, market operator or clearing and settlement facility; or
(iv) disciplined by the Market Operator, a Clearing Facility, a Settlement Facility or any other exchange, market operator or clearing and settlement facility.
Maximum penalty: $1,000,000
2.1.5 Unprofessional Conduct
(1) A Market Participant must not engage in Unprofessional Conduct.
(2) A Market Participant must ensure that its Responsible Executives do not engage in Unprofessional Conduct.
Maximum penalty: $1,000,000
2.1.6 Responsibility for individuals involved in business
A Market Participant is responsible for all actions and omissions of its Employees.
Note: There is no penalty for this Rule.
Part 2.2 Insurance and information requirements
2.2.1 Insurance requirements—Obligation to have insurance
(1) Subject to Rule 2.2.2, every Market Participant must, where the Market Participant acts for any person other than itself or a Related Body Corporate, take out and maintain, at all times, a professional indemnity (or equivalent) insurance policy that the Market Participant determines (acting reasonably) to be adequate having regard to the nature and extent of the business carried on by the Market Participant in connection with its business as a Market Participant and the responsibilities and risks assumed or which may be assumed by the Market Participant in connection with that business.
(2) The professional indemnity (or equivalent) insurance referred to in subrule (1) must include insurance against a breach of duty the Market Participant owes in a professional capacity, whether owed in contract or otherwise at law, arising from any act or omission of the Market Participant and its Employees.
Maximum penalty: $100,000
2.2.2 Insurance requirements—Insurance with Related Body Corporate
If the insurance referred to in Rule 2.2.1 is provided by a Related Body Corporate, the Market Participant must provide ASIC with the following information by no later than 10 Business Days after the issue or renewal of the insurance:
(a) the name of the Related Body Corporate and a copy of evidence sufficient to establish that it is a Related Body Corporate; and
(b) confirmation from the Related Body Corporate that it is the insurer or the self-insurer covering and indemnifying the Market Participant against the liabilities referred to in Rule 2.2.1 and a copy of the certificate evidencing the insurance.
Maximum penalty: $20,000
2.2.4 Insurance requirements—Notification of claims
In relation to any liability or potential liability of the type referred to in Rule 2.2.1, a Market Participant must immediately notify ASIC of any notification to its insurer of any claim, potential claim or circumstance that might give rise to a claim and must include the following details:
(a) any circumstance which is likely to give rise to a claim or potential claim against the Market Participant;
(b) the receipt of a notice from any person of any intention to make a claim or potential claim against the Market Participant; and
(c) the details of any claim, potential claim or circumstance against the Market Participant, including the gross contingent liability, the net contingent liability, the full name of the Market Participant’s insurer and the date the Market Participant notified its insurer of the claim, potential claim or circumstance.
Maximum penalty: $20,000
2.2.5 Information requirements—Obligation to notify of legal proceedings
If:
(a) a Market Participant commences legal proceedings against, or has legal proceedings commenced against it by, another Market Participant, a Clearing Participant, a Settlement Participant, a regulatory authority or a client in connection with their role as a Market Participant; and
(b) those legal proceedings may affect the operations of the Market Operator, or the interpretation of these Rules or the Market Operating Rules,
the Market Participant must, upon commencing or upon becoming aware of the proceedings, immediately notify ASIC and the Market Operator in writing of the particulars of the proceedings.
Maximum penalty: $100,000
Part 2.3 Responsible Executives
2.3.1 Appointment or resignation of Responsible Executives
(1) A Market Participant must notify ASIC within 10 Business Days if the Market Participant appoints a new Responsible Executive, or if a person ceases to be a Responsible Executive of the Market Participant.
(2) A Market Participant must not appoint a person as a Responsible Executive unless:
(a) the person has skills, knowledge and experience that are appropriate having regard to the supervisory role that the person will perform as a Responsible Executive in the business of the Market Participant; and
(b) as at the date the Market Participant appoints the person, the person satisfies the requirements of being a Responsible Executive under the ASX Market Integrity Rules and/or the Chi-X Australia Market Integrity Rules; or
(c) the person has:
(i) attained a mark of at least 65% in an examination approved by ASIC under subrule (3), in the 12 months preceding the date the Market Participant appoints the person as a Responsible Executive; and
(ii) satisfied the Compliance Education Requirements from the date the person passed the examination as referred to in subparagraph (i) to the date the Market Participant appoints the person as a Responsible Executive, pro-rata to the number of full months in that period.
(3) For the purposes of subparagraph (2)(c)(i), ASIC may approve, in writing, one or more examinations that, in the opinion of ASIC, assess knowledge and competency in the application of the provisions of these Rules, the Market Operating Rules and the Corporations Act that govern the operation of the APX Market and are relevant to the role performed by Responsible Executives.
Maximum penalty: $20,000
2.3.2 Ongoing responsibilities of Market Participants in relation to Responsible Executives
A Market Participant must ensure that each of its Responsible Executives:
(a) supervises the design and implementation activities and the functioning and review of the operations and processes referred to in Rule 2.1.1 for the Relevant Activities of that Responsible Executive; and
(b) is accountable to the Market Participant for the effective design, implementation, functioning and review of the operations and processes referred to in paragraph (a).
Maximum penalty: $20,000
2.3.3 Annual review and representation to Market Participant
(1) A Market Participant must ensure that each of its Responsible Executives:
(a) maintains the currency of his or her knowledge of these Rules, the Market Operating Rules and the Corporations Act related to the business that the Market Participant conducts in the APX Market;
(b) by 10 July each year, performs a review as at 30 June of that year, including all matters reasonably considered by the Responsible Executive to be necessary in the circumstances, of the supervision and control procedures involved in the business of the Market Participant and other relevant documentation concerning the Market Participant’s compliance with these Rules and the Market Operating Rules for the 12 month period ending on 30 June that year;
(c) by 10 July each year, determines whether, based on the enquiries referred to in paragraph (b), the controls over the operations and processes of the Relevant Activities have been, during the period referred to in paragraph (b), and continue to be, reasonably designed, implemented and functioning to achieve compliance by the Market Participant with these Rules and the Market Operating Rules; and
(d) by 10 July each year, provides a signed and dated representation to the Market Participant as to whether:
(i) the requirements of paragraphs (a) and (b) have been met for the period referred to in paragraph (b); and
(ii) the controls over the operations and processes of the Relevant Activities have been, for the period referred to in paragraph (b), and continue to be, reasonably designed, implemented and functioning to achieve compliance by the Market Participant with the Market Operating Rules and these Rules.
(2) The Market Participant must retain copies of the representation referred to at paragraph(1)(d), and of the documentation concerning the Market Participant’s compliance with these Rules and the Market Operating Rules on which the representation is based, for 7 years from the date the representation is provided to the Market Participant.
Maximum penalty: $20,000
2.3.4 Continuing education requirements for Responsible Executives
A Market Participant must ensure that, during the period from 1 July each year until 30 June the following year, each of its Responsible Executives meets the Compliance Education Requirements pro-rata to the number of complete months during that period in which that person is a Responsible Executive of the Market Participant.
Maximum penalty: $20,000
2.3.5 Annual continuing education and compliance self-assessment
(1) Subject to subrule (2), a Market Participant must provide a written notification to ASIC by 31 July each year that contains the following information:
(a) the name of each person who was a Responsible Executive of the Market Participant during the period from 1 July in the preceding calendar year to 30 June in the calendar year in which the notification is provided;
(b) if the person was a member of a professional body or bodies during the period referred to in paragraph (a), the name of that body or those bodies;
(c) a statement in relation to each person that the Market Participant confirms that, during the period referred to in paragraph (a), the person:
(i) has satisfied; or
(ii) has not satisfied,
as the case may be, each of the requirements of subrule 2.1.4(1) (good fame and character), paragraphs 2.3.1(2)(a) and (b) or (c) (skills, knowledge, experience and qualifications), subrule 2.1.5(2) (Unprofessional Conduct), paragraph 2.3.3(1)(d) (annual representation) and Rule 2.3.4 (continuing education), while the person was a Responsible Executive of the Market Participant during that period; and
(d) if subparagraph (c)(ii) applies, an explanation of the reason that the person has not satisfied the requirement.
(2) A notification provided under subrule (1) prior to 1 August 2013 need only relate to the period from the Commencement Date to 30 June 2013.
(3) The Market Participant must retain copies of the records upon which the notification referred to in subrule (1) is based for 7 years from the end of the period to which the notification relates.
Maximum penalty: $20,000
Part 2.5 Designated Trading Representatives (DTRs)
2.5.1 Trading in a Trading Platform
A Market Participant must ensure that all trading in a Trading Platform by the Market Participant is carried out either:
(a) by DTRs; or
(b) in accordance with the Automated Order Processing Requirements.
Maximum penalty: $1,000,000
2.5.2 Market Participant must have a DTR
A Market Participant must have at least one DTR.
Maximum penalty: $1,000,000
2.5.3 DTRs may submit Trading Messages
A Market Participant must ensure that only its DTRs submit Trading Messages into the Trading Platform through the Market Participant’s system, unless the trading is conducted in accordance with the Automated Order Processing Requirements.
Maximum penalty: $1,000,000
2.5.4 Responsibility of Market Participant
A Market Participant is responsible for the accuracy of details, the integrity and bona fides of all Trading Messages containing their unique identifier that are submitted into the Trading Platform, regardless of whether a DTR of the Market Participant was involved in their submission.
Note: There is no penalty for this Rule.
2.5.5 DTR criteria
A Market Participant must ensure that:
(a) each of its DTRs is at all times a Representative of the Market Participant authorised to deal in the APX Products in respect of which the DTR submits orders on behalf of the Market Participant either:
(i) under the Market Participant’s AFSL; or
(ii) under the person’s own AFSL (unless the person is a Principal Trader not required to hold an AFSL);
(b) each of its DTRs is suitably qualified and experienced to deal in the APX Products referred to in paragraph (a), by submitting orders on behalf of the Market Participant;
(c) prior to submitting Trading Messages on behalf of the Market Participant, each DTR has demonstrated to the Market Participant knowledge of the Dealing Rules governing the process of dealing and reporting Market Transactions on the Trading Platform, and the relevant practices of the Market Operator; and
(d) each of its DTRs does not:
(i) execute any order in a Trading Platform for or on behalf of, or which will benefit, directly or indirectly, the DTR or any associate or Relative of the DTR, without the prior written approval of the Market Participant; or
(ii) intentionally take advantage of a situation arising as a result of:
(A) a breakdown or malfunction in the Market Operator’s procedures or systems; or
(B) an error in entries made by the Market Operator within a Trading Platform.
Maximum penalty: $1,000,000
2.5.6 Market Participant must allocate unique identifier
A Market Participant must allocate a unique identifier to each DTR of the Market Participant.
Maximum penalty: $100,000
2.5.7 Records—DTRs
A Market Participant must maintain a record of:
(a) the name, contact details and DTR identifier of each of its DTRs, while the person remains a DTR of a Market Participant; and
(b) the information in paragraph (a) for a period of 7 years from the date the person ceases to be a DTR of the Market Participant.
Maximum penalty: $100,000
Part 2.6 Foreign Participants
2.6.1 Minimum presence requirements
(1) This Rule applies to a Market Participant (“Foreign Market Participant”) that:
(a) is a foreign entity; and
(b) does not hold an AFSL.
(2) Before entering into a Market Transaction, a Foreign Market Participant must provide ASIC with a deed of the Foreign Market Participant for the benefit of and enforceable by ASIC and the other persons referred to in subsection 659B(1) of the Corporations Act, which deed provides that:
(a) the deed is irrevocable except with the prior written consent of ASIC;
(b) the Foreign Market Participant submits to the non-exclusive jurisdiction of the Australian courts in legal proceedings conducted by ASIC (including under section 50 of the ASIC Act) and, in relation to proceedings relating to a financial services law, by any person referred to in subsection 659B(1) of the Corporations Act and whether brought in the name of ASIC or the Crown or otherwise;
(c) the Foreign Market Participant covenants to comply with any order of an Australian court in respect of any matter relating to the activities or conduct of the Foreign Market Participant in relation to the APX Market or in relation to Financial Products traded on the APX Market, including but not limited to any matter relating to the Foreign Market Participant’s obligations under:
(i) the ASIC Act;
(ii) the Corporations Act; and
(iii) the Corporations (Fees) Act 2001 (Cwlth);
(d) if the Foreign Market Participant is not registered under Division 2 of Part 5B.2 of the Corporations Act:
(i) the Foreign Market Participant must have at all times an agent who is:
(A) a natural person or a company;
(B) resident in this jurisdiction; and
(C) authorised to accept, on behalf of the Foreign Market Participant, service of process and notices; and
(ii) the Foreign Market Participant must notify ASIC of any change to:
(A) the agent; or
(B) the name and address of the agent (if the agent is a company, address means the address of the registered office of the company); and
(iii) service of process on the Foreign Market Participant in relation to legal proceedings conducted by ASIC (including under section 50 of the ASIC Act), and in relation to proceedings relating to a financial services law, by any person referred to in subsection 659B(1) of the Corporations Act and whether brought in the name of ASIC or the Crown or otherwise, can be effected by service on the agent;
(e) the deed applies notwithstanding that the Foreign Market Participant may have ceased to be a Market Participant; and
(f) such additional terms notified by ASIC to the Foreign Market Participant.