ASIC Market Integrity Rules (ASX Market) 2010

About this compilation

Compilation No. 14

This is a compilation of ASIC Market Integrity Rules (ASX Market) 2010 as in force on 27 October 2015. It includes any commenced amendment affecting the legislative instrument to that date.

This compilation was prepared by the Australian Securities and Investments Commission.

The notes at the end of this compilation (the endnotes) include information about amending instruments and the amendment history of each amended provision.

Contents

Chapter 1: Introduction

Part 1.1 Preliminary

Part 1.2 Waiver

Part 1.3 Notice, notification and service of documents

Part 1.4 Interpretation

Chapter 2: Participants and Representatives

Part 2.1 Management requirements

Part 2.2 Insurance and information requirements

Part 2.3 Responsible Executives

Part 2.4 Retail Client Adviser Accreditation

Part 2.5 Designated Trading Representatives (DTRs)

Part 2.6 Foreign Participants

Chapter 3: Client relationships

Part 3.1 Clients trading in products for first time

Part 3.2 Trading as Principal

Part 3.3 Client instructions

Part 3.4 Reporting to Clients

Part 3.5 Client Money and Property

Part 3.6 Prohibition of advice to Client

Chapter 4: Records

Part 4.1 Trading records

Part 4.2 Records—General

Part 4.3 Access to records

Chapter 5: Trading

Part 5.1 Client order priority

Part 5.3 Large Order facilitation

Part 5.4 Transactions by connected persons (including persons connected with other Market Participants)

Part 5.5 Participant’s trading infrastructure

Part 5.6 Automated Order Processing—Filters, conduct, and infrastructure

Part 5.7 Manipulative trading

Part 5.8 Prohibition on wash trades, pre-arranged trades and dual trading—Futures

Part 5.9 Fair and orderly markets

Part 5.10 Dealing in Cash Market Products

Part 5.11 Suspicious activity reporting

Chapter 6: Takeovers

Part 6.1 Market Bid—Announcements by Market Participant

Part 6.2 Acquisition of Cash Market Products during the Bid Period

Part 6.3 Market Participant acting for Bidder or Issuer

Chapter 7: Rules applying to Market Operators

Part 7.1 Data feeds

Part 7.2 Information

Chapter 10: Futures Market Transactions

Part 10.A Interpretation

Part 10.1 Payment by client

Part 10.2 Death of client and other circumstances

Part 10.3 Default by a client

Endnotes

Chapter 2: Participants and Representatives

Part 2.1 Management requirements

2.1.1 Management structure

(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 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:

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) 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 3 months of the Commencement Date.

(2) 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.

Maximum penalty: $20,000

2.1.3 Supervisory procedures

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 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 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:

  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:

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:

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 Market Participant commences legal proceedings against, or has legal proceedings commenced against it by, another Market Participant, a Clearing 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:

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) if the person was a Responsible Executive prior to the Commencement Date:

  the person had satisfied the requirements of rule 3.6.5 of the operating rules in effect on the day immediately preceding the Commencement Date; and

  (ii) the Market Participant is satisfied on reasonable grounds that the person has completed an appropriate level of Compliance Education from the date the person passed the examination as required under the rule referred to in subparagraph (i) to the date the Market Participant appoints the person as Responsible Executive;
(c) if the person becomes a Responsible Executive for the first time on or after the Commencement Date, the person has:

  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 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:

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;

(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:

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 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;
(d) by 10 July each year, provides a signed and dated representation to the Market Participant as to whether:

  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

(1) Subject to subrule (2), 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.

(2) For the period that commences on the Commencement Date and ends on 1 July in the following year, the Market Participant must ensure that each person that was a Responsible Executive of the Market Participant on the Commencement Date meets the Compliance Education Requirements pro-rata to the number of complete months in that period.

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:

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:

  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;
(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 2011 need only relate to the period from the Commencement Date to 30 June 2011.

(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 2.4 Retail Client Adviser Accreditation

2.4.1 Accreditation required

(1) A Market Participant must ensure that each of its Representatives who provides Financial Product Advice to a Retail Client in relation to:

Options Market Contracts;

(b) Futures Market Contracts; or
(c) Warrants,

holds the relevant accreditation required by these Rules.

(2) A Market Participant must not, and must ensure that a Representative does not, hold himself or herself out as holding a type of accreditation under these Rules if they do not hold that type of accreditation.

(3) A person:

accredited as a Level One Accredited Derivatives Adviser under the Rule 2.4.7 of the ASIC Market Integrity Rules (Chi-X Australia Market) 2011 holds the relevant accreditation required by these Rules for the provision of Financial Product Advice to a Retail Client in relation to subscribing for, buying, selling and exercising Warrants;

accredited as a Level Two Accredited Derivatives Adviser under the Rule 2.4.8 of the ASIC Market Integrity Rules (Chi-X Australia Market) 2011 holds the relevant accreditation required by these Rules for the provision of Financial Product Advice to a Retail Client in relation to subscribing for, buying, selling and exercising Warrants, and in relation to all trading strategies relating to Warrants.

Maximum penalty: $100,000

2.4.2 Extent of advice to clients—Level One Accredited Derivatives Adviser

(1) A Market Participant must ensure that each of its Representatives who provides Financial Product Advice to a Retail Client in relation to:

taking Options Market Contracts (other than Futures Options);

(b) writing Options Market Contracts (other than Futures Options), but only for the purpose of closing out a position or writing Covered Call Options under paragraph (e);
(c) subscribing for and buying and selling Warrants;
(d) exercising Warrants and Options Market Contracts (other than Futures Options); and
(e) the Covered Call Option writing strategies as set out in Rule 2.4.3,

is accredited as a Level One Accredited Derivatives Adviser or a Level Two Accredited Derivatives Adviser.

(2) A Market Participant must ensure that each of its Representatives who is only accredited as a Level One Accredited Derivatives Adviser does not advise or make recommendations in relation to LEPOs.

Maximum penalty: $100,000

2.4.3 Covered Call Option Strategy

(1) For the purposes of Rule 2.4.2, “a Covered Call Option” writing strategy entails either:

a client who already owns Underlying Financial Products in a particular Class writing Call Options over those Underlying Financial Products up to the number of Underlying Financial Products which the client owns and either prior to, or simultaneously with writing the Call Options, providing to the Clearing Facility those Underlying Financial Products as cover for the written Call Option obligations; or

a client buying a particular Class of Underlying Financial Products and simultaneously writing Call Options over those Underlying Financial Products on the understanding that the client will provide, to the Clearing Facility, within 3 Trading Days of entering into the strategy, the simultaneously purchased Underlying Financial Products as cover for the written Call Option obligations.

(2) For the purposes of subrule (1), “Call Option” means an Options Market Contract that gives the taker a right, but not an obligation, to buy the Underlying Financial Products.

Note: There is no penalty for this Rule.

2.4.4 Extent of advice to clients—Level Two Accredited Derivatives Adviser

(1) A Market Participant must ensure that each of its Representatives who provides Financial Product Advice to a Retail Client in relation to:

taking, writing and exercising all Derivatives Market Contracts (other than Futures Market Contracts and Futures Options);

(b) subscribing for, buying, selling and exercising Warrants;
(c) all trading strategies relating to Derivatives Market Contracts (other than Futures Market Contracts and Futures Options); and
(d) all trading strategies relating to Warrants,

is accredited as a Level Two Accredited Derivatives Adviser.

(2) For the avoidance of doubt, a person accredited as a Level Two Accredited Derivatives Adviser may advise and make recommendations in relation to the Products and strategies set out in Rules 2.4.2 and 2.4.3.

Maximum penalty: $100,000

2.4.5 Extent of advice to clients—Accredited Futures Adviser

A Market Participant must ensure that each of its Representatives who provides Financial Product Advice to Retail Clients in relation to:

taking, writing and exercising Futures Market Contracts;

(b) taking, writing and exercising Futures Options;
(c) all trading strategies relating to Futures Market Contracts; and
(d) all trading strategies relating to Futures Options,

is accredited as an Accredited Futures Adviser.

Maximum penalty: $100,000

2.4.6 Accreditation—Accredited Futures Adviser

(1) ASIC may, subject to any conditions ASIC considers appropriate, accredit a person as an Accredited Futures Adviser for a period of time if:

the person is a Representative of a Market Participant and the Market Participant nominates the person to be an Accredited Futures Adviser under subrule (2);

(b) the person:

  is a Level Two Accredited Derivatives Adviser;

  (ii) has successfully completed an educational module or subject, or series of educational modules or subjects, approved by ASIC in accordance with subrule (4);
(c) the person has read and understood:

  these Rules;

  (ii) the Market Operating Rules; and
  (iii) other reading materials approved by ASIC in accordance with subrule (4); and
(d) ASIC has no reason to believe that the person does not have the requisite skill, knowledge and integrity to give Financial Product Advice of the kind covered by Rule 2.4.5.

(2) A Market Participant may nominate a person to be an Accredited Futures Adviser by submitting a written application to ASIC that includes:

the full name and date of birth of the applicant, a statement that the applicant is a Representative of the Market Participant, and a description of the nature of the relationship of the applicant to the Market Participant (for example, employee);

the name, business address and AFSL number of the Market Participant nominating the applicant to be an Accredited Futures Adviser;

(c) the name, position and contact telephone number of the person referred to in subrule (3);
(d) a declaration, signed by the applicant, that the applicant has met the requirements of paragraphs (1)(b) and (c); and
(e) if subparagraph (1)(b)(ii) applies, evidence that the applicant has met the requirements of that subparagraph.

(3) A director, partner, Responsible Executive or Compliance Manager of the Market Participant must sign and date the application referred to in subrule (2).

(4) For the purposes of paragraphs (1)(b) and (c), ASIC may approve, in writing, educational modules, subjects and reading materials that are relevant to Financial Product Advice of the kind covered by Rule 2.4.5.

Note: There is no penalty for this Rule.

2.4.7 Accreditation—Level One Accredited Derivatives Adviser

(1) ASIC may, subject to any conditions ASIC considers appropriate, accredit a person as a Level One Accredited Derivatives Adviser for a period of time if:

the person is a Representative of a Market Participant and the Market Participant nominates the person to be a Level One Accredited Derivatives Adviser under subrule (2);

(b) the person:

  unless the person is applying for, or has been granted, an exemption under subrule 2.4.11(1), has obtained a score of 80% or more for an Accreditation Examination for Level One Accredited Derivatives Advisers approved by ASIC in accordance with subrule (4);

  (ii) has successfully completed an educational module or subject, or a series of educational modules or subjects, approved by ASIC in accordance with subrule (4); and
(c) ASIC has no reason to believe that the person does not have the requisite skill, knowledge and integrity to provide Financial Product Advice of the kind covered by Rules 2.4.2 and 2.4.3.

(2) A Market Participant may nominate a person to be a Level One Accredited Derivatives Adviser by submitting a written application to ASIC that includes:

the full name, date of birth, business address and email address of the applicant, a statement that the applicant is a Representative of the Market Participant and a description of the nature of the relationship of the applicant to the Market Participant (for example, employee);

(b) the name, business address and AFSL number of the Market Participant nominating the person to be a Level One Accredited Derivatives Adviser;
(c) the name, position and contact telephone number of the director, partner, Responsible Executive or Compliance Manager of the Market Participant referred to in subrule (3);
(d) unless the person has been granted, or is applying for, an exemption under subrule 2.4.11(1), a declaration by the Market Participant that the applicant meets the requirements of paragraph (1)(b);
(e) if subparagraph (1)(b)(ii) applies, evidence that the applicant has successfully completed the educational subject or module, or series of educational subjects or modules, referred to in that subparagraph; and
(f) an acknowledgement by the Market Participant that accreditation as a Level One Accredited Derivatives Adviser will only authorise the applicant to provide Financial Product Advice of the kind covered by Rules 2.4.2 and 2.4.3.

(3) A director, partner, Responsible Executive or Compliance Manager of the Market Participant must sign and date the application referred to in subrule (2).

(4) For the purposes of subrule (1), ASIC may approve examinations, educational modules or subjects, or a series of educational modules or subjects, that are relevant to Financial Product Advice of the kind covered by Rules 2.4.2 and 2.4.3.

Note: There is no penalty for this Rule.

2.4.8 Accreditation—Level Two Accredited Derivatives Adviser

(1) ASIC may, subject to any conditions ASIC considers appropriate, accredit a person as a Level Two Accredited Derivatives Adviser for a period of time if:

the person is a Representative of a Market Participant and the Market Participant nominates the person as a Level Two Accredited Derivatives Adviser in accordance with subrule (2);

(b) unless the person is applying for, or has been granted, an exemption under subrule 2.4.11(1), the person has obtained a score of 80% or more for each of the Accreditation Examinations for Level One Accredited Derivatives Advisers and Level Two Accredited Derivatives Advisers approved by ASIC in accordance with subrule (4); and
(c) ASIC has no reason to believe that the person does not have the requisite skill, knowledge and integrity to provide Financial Product Advice of the kind covered by Rules 2.4.2, 2.4.3 and 2.4.4.

(2) A Market Participant may nominate a person to be a Level Two Accredited Derivatives Adviser by submitting a written application to ASIC that includes:

the full name, date of birth, business address, email address and contact telephone number of the applicant, a statement that the applicant is a Representative of the Market Participant and description of the nature of the relationship of the applicant to the Market Participant (for example, employee);

(b) the name, business address and AFSL number of the Market Participant nominating the person to be a Level Two Accredited Derivatives Adviser;
(c) the name, position and contact telephone number of the director, partner, Responsible Executive or Compliance Manager of the Market Participant referred to in subrule (3);
(d) unless the person has been granted, or is applying for, an exemption under subrule 2.4.11(1), a declaration by the Market Participant that the applicant meets the requirements of paragraph (1)(b); and
(e) an acknowledgement by the Market Participant that accreditation as a Level Two Accredited Derivatives Adviser will only authorise the applicant to provide Financial Product Advice of the kind covered by Rules 2.4.2, 2.4.3 and 2.4.4.

(3) A director, partner, Responsible Executive or Compliance Manager of the Market Participant must sign and date the application referred to in subrule (2).

(4) For the purposes of subrule (1), ASIC may approve, in writing one or more examinations that are relevant to Financial Product Advice of the kind covered by Rules 2.4.2, 2.4.3 and 2.4.4.

Note: There is no penalty for this Rule.

2.4.9 Acceptance of application

(1) If ASIC is satisfied that:

an application for accreditation made by a Market Participant; and

(b) the person in respect of which the application for accreditation is made,

under Rule 2.4.6, 2.4.7 or 2.4.8, meets the applicable requirements of the Rule, ASIC will accredit the person in the relevant category of accreditation.

(2) ASIC will give the Market Participant a written notice that a person has been accredited under subrule (1), specifying:

any conditions to which the accreditation is subject;

(b) the Renewal Date.

(3) Nothing in subrule (1) prevents ASIC from seeking further information from the Market Participant for the purposes of satisfying itself that the person or the application meets the requirements of the relevant Rule.

Note: There is no penalty for this Rule.

2.4.10 Rejection of application

(1) Subject to subrule (2), if ASIC is not satisfied that:

an application for accreditation made by a Market Participant; or

(b) the person in respect of which the application for accreditation is made,

under Rule 2.4.6, 2.4.7 or 2.4.8, meets the applicable requirements of the Rule, ASIC will reject the application.

(2) ASIC will give the Market Participant a written notice that an application for accreditation has been rejected under subrule (1), specifying the reason or reasons why the application is rejected.

(3) Nothing in subrule (1) prevents ASIC from seeking further information from the Market Participant for the purposes of satisfying itself that the person or the application meets the requirements of the relevant Rule.

Note: There is no penalty for this Rule.

2.4.11 Exemption for other accreditation and experience

(1) ASIC may exempt a person, in writing, from the requirement to sit an Accreditation Examination if the person has:

completed a course listed on ASIC’s Training Register as a specialist course and which, in the opinion of ASIC, provides appropriate coverage of these Rules, the Market Operating Rules, the Trading Platform and the relevant Products;

(b) completed relevant training, other than a course listed on ASIC’s Training Register, and can demonstrate, to the satisfaction of ASIC, their knowledge of these Rules, the Market Operating Rules, the Trading Platform and the relevant Products; or
(c) extensive relevant industry experience and can demonstrate, to the satisfaction of ASIC, their knowledge of these Rules, the Market Operating Rules, the Trading Platform and the relevant Products.

(2) ASIC may require a Market Participant to provide further information which ASIC considers necessary to establish the experience, expertise and professional history of a person nominated under this Rule for exemption from the examination requirement.

(3) ASIC may require a person nominated for exemption under this Rule to complete and pass a modified version of an Accreditation Examination to demonstrate the person’s expertise and knowledge of the Rules, the Market Operating Rules, the Trading Platform and relevant Products.

Note: There is no penalty for this Rule.

2.4.12 Examinations

(1) Unless ASIC gives permission under this Rule, a person may sit an Accreditation Examination for a category of accreditation no more than three times.

(2) If a person has not obtained the required pass level after sitting the Accreditation Examination three times, the Market Participant may apply to ASIC under subrule (3) for permission for the person to sit the Accreditation Examination again.

(3) A Market Participant may apply for permission for a person to sit an Accreditation Examination again by submitting a written application to ASIC that includes:

the full name, business and email address of the applicant;

(b) the name and business address of the Market Participant seeking permission for the applicant to sit the Accreditation Examination again;
(c) the type of Accreditation Examination that the Market Participant is applying for the applicant to re-sit;
(d) the date on which the person last sat the Accreditation Examination;
(e) reasons in support of the applicant being permitted to sit the Accreditation Examination again; and
(f) the name and position of the Responsible Executive referred to in subrule (4).

(4) A Responsible Executive of the Market Participant (or, if the applicant is a Responsible Executive, another Responsible Executive of the Market Participant) must sign and date the application referred to in subrule (3).

(5) After considering the application, ASIC may permit the person to sit the examination again.

(6) ASIC will not consider an application under this Rule unless 3 months have passed since the person last sat the Accreditation Examination.

Note: There is no penalty for this Rule.

2.4.13 Renewal of accreditation

(1) ASIC may renew the accreditation of an Accredited Adviser for a period of time with effect from the Renewal Date if:

the person is a Representative of a Market Participant and the Market Participant applies to ASIC during the Renewal Period to renew the person’s accreditation under subrule (2);

(b) the person has complied with the Continuing Professional Education Requirements pro-rata to the number of full months in the period from the date the Accredited Adviser was first accredited or last renewed their accreditation to the date of the application; and
(c) ASIC has no reason to believe that the person does not have the requisite skill, knowledge and integrity to provide Financial Product Advice of the kind covered by the relevant category of accreditation.

(2) A Market Participant may apply to ASIC to renew the accreditation of a person by submitting a written application to ASIC during the Renewal Period that includes:

the name and business address of the Market Participant seeking renewal of the accreditation of the persons named in the application;

(b) in respect of each Accredited Adviser seeking renewal of accreditation:

  the name of the Accredited Adviser;

  (ii) the category of accreditation held by the Accredited Adviser;
  (iii) a declaration that the Accredited Adviser is a Representative of the Market Participant;
  (iv) a declaration that the Accredited Adviser meets the requirements of paragraph (1)(b); and
(c) the name, position, contact telephone number, facsimile number and email address of the director, partner, Responsible Executive or Compliance Manager of the Market Participant referred to in subrule (3).

(3) A director, partner, Responsible Executive or Compliance Manager of the Market Participant must sign and date the application referred to in subrule (2).

Note: There is no penalty for this Rule.

2.4.14 Acceptance of application

(1) If ASIC is satisfied that:

an application for renewal of accreditation made by a Market Participant; and

(b) a person in respect of which the application has been made,

meets the requirements of Rule 2.4.13, ASIC will renew the accreditation of the person with effect from the Renewal Date.

(2) ASIC will give the Market Participant a written notice that a person’s accreditation has been renewed under subrule (1), specifying the next Renewal Date.

(3) Nothing in subrule (1) prevents ASIC from seeking further information from the Market Participant for the purposes of satisfying itself that the person or the application meets the requirements of the relevant Rule.

Note: There is no penalty for this Rule.

2.4.15 Rejection of application or renewal subject to conditions

(1) Subject to subrule (2), if ASIC is not satisfied that:

an application for renewal of accreditation; or

(b) a person in respect of which the application has been made,

meets the requirements of Rule 2.4.13, ASIC may:

reject the application for renewal in respect of one or more persons; or

(d) renew the person’s accreditation but subject to such conditions as ASIC considers appropriate.

(2) If ASIC rejects the application under paragraph (1)(c), ASIC will give the Market Participant a written notice that a person’s application for renewal has been rejected, specifying the reason or reasons that the application has been rejected.

(3) If ASIC renews the person’s accreditation subject to conditions under paragraph (1)(d), ASIC will give the Market Participant a written notice that a person’s accreditation has been renewed, specifying:

the conditions to which the renewed accreditation is subject; and

(b) the next Renewal Date.

(4) Nothing in subrule (1) prevents ASIC from seeking further information from the Market Participant for the purposes of satisfying itself that the person or the application meets the requirements of the relevant Rule.

Note: There is no penalty for this Rule.

2.4.16 Effect of non-renewal

If, by 1 Business Day after the Renewal Date, ASIC has not renewed the accreditation of an Accredited Adviser under subrule 2.4.14(1) or paragraph 2.4.15(1)(d), the person will cease to hold the relevant accreditation with effect from the Renewal Date.

Note: There is no penalty for this Rule.

2.4.17 Automatic withdrawal of accreditation

(1)An Accredited Adviser’s accreditation is automatically withdrawn when the Accredited Adviser ceases to be a Representative of the Market Participant that made the application for the person to be accredited.

(2)If an Accredited Adviser ceases to be a Representative of a Market Participant, the Market Participant must notify ASIC in writing within 5 Business Days of:

the name and date of birth of the Accredited Adviser; and

(b) the date the Accredited Adviser ceased to be a Representative of the Market Participant.

Note: There is no penalty for this Rule.

2.4.18 Voluntary withdrawal of accreditation

(1)ASIC may withdraw the accreditation of an Accredited Adviser in one or more categories of accreditation if the Market Participant of which the person is a Representative requests that ASIC withdraw the accreditation under subrule (2).

(2) A Market Participant may request that ASIC withdraw the accreditation of an Accredited Adviser by submitting a written application to ASIC that includes:

the name and date of birth of the Accredited Adviser;

(b) the name and business address of the Market Participant requesting that the accreditation be withdrawn;
(c) the category of the accreditation which is to be withdrawn;
(d) the Trading Day on which the Market Participant wishes the withdrawal to take effect;
(e) the reasons for withdrawal of the accreditation; and
(f) the name, position and contact telephone number of the director, partner, Responsible Executive or Compliance Manager of the Market Participant referred to in paragraph (3)(a).

(3) The application must be signed and dated by:

a director, partner, Responsible Executive or Compliance Manager of the Market Participant; and

(b) the relevant Accredited Adviser.

Note: There is no penalty for this Rule.

2.4.19 Suspension or withdrawal by ASIC

(1) ASIC may suspend or withdraw the accreditation of an Accredited Adviser in a category of accreditation if ASIC has reason to believe that the person does not have the requisite skill, knowledge or integrity to provide Financial Product Advice of the kind covered by the relevant category of accreditation.

(2) ASIC will notify the relevant Market Participant and the Accredited Adviser in writing of a suspension or withdrawal of accreditation under subrule (1) and the reasons for the suspension or withdrawal.

Note: There is no penalty for this Rule.

2.4.20 Re-accreditation after withdrawal or expiry

(1) ASIC may re-accredit a person whose accreditation has been withdrawn or has expired, without the person sitting another Accreditation Examination if:

the person is a Representative of a Market Participant and the Market Participant applies to ASIC to re-accredit the person under subrule (2);

(b) the person became an Employee of, or was otherwise engaged by, a Market Participant within 2 years from the date their accreditation was withdrawn or expired, and within 2 months of being re-accredited will re-commence providing Financial Product Advice to clients of a Market Participant of a kind covered by Rules 2.4.2, 2.4.3, 2.4.4 or 2.4.5;
(c) the person has complied with the Continuing Professional Education Requirements pro-rata to the number of full months since the date their accreditation was granted or last renewed; and
(d) ASIC has no reason to believe that the person does not have the requisite skill, knowledge and integrity to provide Financial Product Advice of the kind covered by the relevant category of accreditation.

(2) A Market Participant may apply to ASIC to re-accredit a person whose accreditation has been withdrawn or has expired by submitting a written application to ASIC that includes:

the name, date of birth, business address and email address of the applicant, a statement that the applicant is a Representative of the Market Participant and a description of the nature of the relationship of the applicant to the Market Participant (for example, employee);

(b) the name, business address and AFSL number of the Market Participant seeking renewal of the accreditation of the applicant;
(c) the category of accreditation sought;
(d) a statement that the Market Participant requests the requirement for the person to sit the Accreditation Examination be waived;
(e) a declaration by the Market Participant that the applicant meets the requirements of paragraph (1)(c); and
(f) the name, position, contact telephone number, facsimile number and email address of the director, partner, Responsible Executive or Compliance Manager of the Market Participant referred to in subrule (3).

(3) A director, partner, Responsible Executive or Compliance Manager of the Market Participant must sign and date the application.

(4) If ASIC is satisfied that:

an application for re-accreditation made by a Market Participant; and

(b) the person in respect of which the application for re-accreditation is made,

meets the applicable requirements of this Rule, ASIC will re-accredit the person in the relevant category of accreditation.

(5) ASIC will give the Market Participant a written notice that the person has been re-accredited under subrule (4), specifying:

any conditions to which the accreditation is subject;

(b) the Renewal Date.

(6) Nothing in subrule (4) prevents ASIC from seeking further information from the Market Participant for the purposes of satisfying itself that the person or the application meets the requirements of the relevant Rule.

Note: There is no penalty for this Rule.

2.4.21 Continuing Professional Education Requirements for Accredited Advisers

(1) A Market Participant must ensure that all of its Accredited Advisers comply with any continuing professional education requirements approved by ASIC in accordance with subrule (2).

(2) For the purposes of subrule (1), ASIC may approve, in writing, continuing professional education requirements for Accredited Advisers that are relevant to the skills and knowledge required to provide Financial Product Advice of the kind covered by the relevant category of accreditation.

Maximum penalty: $20,000

2.4.22 Managed Discretionary Accounts—Derivatives Market Transactions and Warrants

A Market Participant must ensure that a Managed Discretionary Account for a Retail Client which involves dealing in Derivatives Market Transactions or Warrants is operated by an Accredited Adviser with the appropriate accreditation under these Rules.

Maximum penalty: $1,000,000

Part 2.5 Designated Trading Representatives (DTRs)

2.5.1 Trading in a Trading Platform

A Trading Participant must ensure that all trading in a Trading Platform by the Trading Participant is carried out either:

by DTRs; or

(b) in accordance with the Automated Order Processing Requirements.

Maximum penalty: $1,000,000

2.5.2 Trading Participant must have a DTR

A Trading Participant must have at least one DTR in respect of any one or more Products for which the Trading Participant has Trading Permission.

Maximum penalty: $1,000,000

2.5.3 DTRs may submit Trading Messages

A Trading Participant must ensure that only its DTRs submit Trading Messages into the Trading Platform through the Trading 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 Trading Participant

A Trading 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 Trading Participant was involved in their submission.

Note: There is no penalty for this Rule.

2.5.5 DTR criteria

A Trading Participant must ensure that:

each of its DTRs is at all times a Representative of the Trading Participant authorised to deal in the Products in respect of which the DTR submits orders on behalf of the Trading Participant either:

      under the Trading 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 Products referred to in paragraph (a), by submitting orders on behalf of the Trading Participant;
(c) prior to submitting Trading Messages on behalf of the Trading Participant, each DTR has demonstrated to the Trading 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;
(d) each of its DTRs does not:

  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 Trading Participant;

  (ii) intentionally take advantage of a situation arising as a result of:

  a breakdown or malfunction in the Market Operator’s procedures or systems;

  (C) an error made over the National Voiceline System; or
  (D) an error in entries made by the Market Operator within a Trading Platform.

Maximum penalty: $1,000,000

2.5.6 Trading Participant must allocate unique identifier

A Trading Participant must allocate a unique identifier to each DTR of the Trading Participant.

Maximum penalty: $100,000

2.5.7 Records—DTRs

A Trading Participant must maintain a record of:

the name, contact details and DTR identifier of each of its DTRs, while the person remains a DTR of a Trading 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 Trading 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:

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:

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 Market or in relation to Financial Products traded on the Market, including but not limited to any matter relating to the Foreign Market Participant’s obligations under:

  the ASIC Act;

  (ii) the Corporations Act; and
  (iii) the Corporations (Fees) Act 2001;
(d) if the Foreign Market Participant is not registered under Division 2 of Part 5B.2 of the Corporations Act:

  the Foreign Market Participant must have at all times an agent who is:

        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:

  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.

Maximum penalty: $1,000,000

Chapter 3: Client relationships

Part 3.1 Clients trading in products for first time

3.1.1 Documents to be given to a client

Before accepting an order from a person to enter into a Market Transaction, a Market Participant must give the person, in addition to all of the documents which the Market Participant is required to give the person in respect of the Market Transaction under the Corporations Act, all of the documents the Market Participant is required to give the person in respect of the Market Transaction under this Part.

Note: There is no penalty for this Rule.

3.1.2 Documents to be given to a client: Options, LEPOs and Warrants

(1) Subject to subrule (4), before a Market Participant accepts an Order from a person to enter into an Options Market Transaction, the Market Participant must give the person a copy of any current explanatory booklet in respect of Options Market Contracts published by the Market Operator, together with any updates to that explanatory booklet published by the Market Operator, if it is the first time an Order to enter into an Options Market Transaction is accepted from the person.

(2) Subject to subrule (4), before a Market Participant accepts an order from a person to enter into an Options Market Transaction in respect of LEPOs, the Market Participant must give the person a copy of any current explanatory booklet in respect of LEPOs published by the Market Operator, together with any updates to that explanatory booklet published by the Market Operator, if it is the first time an Order in respect of LEPOs is accepted from the person.

(3) Subject to subrule (4), before a Market Participant accepts an Order from a person to purchase a Warrant, the Market Participant must give the person a copy of any current explanatory booklet in respect of Warrants published by the Market Operator, together with any updates to that explanatory booklet published by the Market Operator, if it is the first time an Order in respect of Warrants is accepted from the person.

(4) A Market Participant is not required to comply with subrule (1), (2) or (3) if the person from whom the Order is accepted is a Wholesale Client, unless the person expressly requests it.

(5) For the avoidance of doubt, a Market Participant is not required to comply with subrule (3) if the person from whom the Order is accepted is entering into a Market Transaction to sell Warrants.

Maximum penalty: $100,000

3.1.3 Information to be given to a client: Execution arrangements

Before accepting an Order from a person to enter into a Market Transaction, if the Market Participant does not have Trading Permission to execute that Market Transaction, the Market Participant must give the person a document which clearly discloses the execution arrangements in place for that Market Transaction including, without limitation:

the name, principal telephone number and principal business address of the Trading Participant which executes the Market Transactions of the Market Participant; and

(b) the extent of any NGF coverage of the Market Transaction.

Maximum penalty: $100,000

3.1.4 Information to be given to a client: Clearing arrangements for Equity Securities, Loan Securities or Warrants

(1) Before accepting an order from a person (the “Client”) to enter into a Cash Market Transaction for an Equity Security, Loan Security or Warrant, if the Market Participant:

is not a Clearing Participant, who is permitted under the Clearing Rules to clear the Cash Market Transaction; or

(b) is a Clearing Participant who is permitted under the Clearing Rules to clear that Cash Market Transaction, but has an arrangement with another Clearing Participant to clear that Cash Market Transaction, and such transaction is cleared under the arrangement,

the Market Participant must give the Client a document which clearly discloses the clearing arrangements in place for that Cash Market Transaction, including, without limitation, any information required by subrule (2).

(2) The written disclosure document referred to in subrule (1) must include:

the name, principal telephone number and principal business address of the Clearing Participant which clears the Market Transactions of the Market Participant;

(b) if, under the clearing arrangements:

  notwithstanding that the Market Transaction may have been entered into on the Client’s behalf, the Clearing Participant carries the Clearing Obligations and any settlement obligations for all Market Transactions of the Trading Participant, including those of the Client, and must settle as principal with the Clearing Facility or the relevant counter-party;

  (ii) the Client owes obligations to the Clearing Participant in relation to the clearing and settlement of Cash Market Transactions;
  (iii) the Clearing Participant has rights against the Client in the event that:

  the Client fails to pay the amounts due in respect of Cash Market Transactions;

  (B) the Client fails to fulfil its settlement obligations in respect of Cash Market Transactions,

statements to that effect.

Maximum penalty: $100,000

3.1.5 Information to be given to a client: Clearing arrangements for Futures Market Transactions

Before accepting an order from a person (the “Client”) to enter into a Futures Market Transaction where the Client does not have a direct relationship with a Clearing Participant, if the Market Participant:

is not a Clearing Participant, who is permitted under the Clearing Rules to clear that Futures Market Transaction; or

(b) is a Clearing Participant who is permitted under the Clearing Rules to clear that Futures Market Transaction, but has an arrangement with another Clearing Participant to clear that Futures Market Transaction, and such transaction is cleared under the arrangement,

the Market Participant must give the Client a document which clearly discloses the clearing arrangements in place for that Futures Market Transaction, including, without limitation, the name, principal telephone number and principal business address of the Clearing Participant which clears the Market Transactions of the Market Participant.

Maximum penalty: $100,000

3.1.6 Minimum terms of Client Agreement for Futures Market Contracts

(1) Before entering into a Market Transaction on behalf of a person (the “Client”) in respect of a Futures Market Contract, the Market Participant must enter into a written agreement with the Client under which the Market Participant discloses, and the Client acknowledges:

that trading in Futures Market Contracts and Options Market Contracts incurs a risk of loss as well as a potential for profit;

(b) that the Client has read and understood the details of the contract specifications of Futures Market Contracts and Options Market Contracts in which the Market Participant will deal on behalf of the Client;
(c) that the Client should consider:

  its objectives, financial situation and needs; and

  (ii) whether dealing in Futures Market Contracts and Options Market Contracts is suitable for its purposes;
(d) that notwithstanding that the Market Participant may act in accordance with the instructions of, or for the benefit of, the Client, any Futures Market Contract or Options Market Contract arising from any order submitted by the Market Participant, is entered into by the Market Participant as principal;
(e) that upon registration of a Futures Market Contract or Options Market Contract with the Clearing Facility in the name of a Clearing Participant, the Clearing Participant incurs obligations to the Clearing Facility as principal, even though the Futures Market Contract or Options Market Contract may have been entered into on the Client’s instructions;
(f) that the Clearing Participant may obtain benefits or rights upon registration of a Futures Market Contract or Options Market Contract with the Clearing Facility by novation of a contract under the Clearing Rules or other legal results of registration and those benefits, rights or legal results may or will be personal to the Clearing Participant and may or will not pass to the Client;
(g) that the Market Participant is not required to act in accordance with the Client’s instructions, where to do so would constitute a breach of the Market Operating Rules, the Clearing Rules or the Corporations Act;
(h) that the Market Participant may, in certain circumstances permitted under the Market Operating Rules or the Corporations Act, take the opposite position in a Market Transaction, either acting for another person or on its Own Account;
(i) that the Market Participant may call for payment of money or the provision of other security in connection with the obligations incurred by the Market Participant in respect of Futures Market Contracts and Options Market Contracts entered into for the account of the Client and:

  the fact that the Client will be required to pay the money or provide the security; and

  (ii) the arrangements for paying the money or providing the security, including, without limitation, the time by which the Client must pay the money or provide the security;
(j) the nature of any events that will constitute a default by the Client in connection with the agreement that are:

  prescribed under the Market Operating Rules; and

  (ii) agreed between the Market Participant and the Client;
(k) the nature of any rights the Market Participant may have against the Client in an event of default disclosed in accordance with paragraph (j) that are:

  prescribed under the Market Operating Rules; and

  (ii) agreed between the Market Participant and the Client;
(l) if the Client will or may be required to pay to the Market Participant commissions, fees, taxes or charges in connection with dealings in Futures Market Contracts and Options Market Contracts for the Client:

  the fact that the Client is required to pay such commissions, fees, taxes and charges; and

  (ii) the manner in which the Client will be notified of the rate of such commissions, fees, taxes and charges;
(m) that the Market Participant may record telephone conversations between the Client and the Market Participant and that if there is a dispute between the Client and the Market Participant, the Client has the right to listen to any recording of those conversations;
(n) if the Market Participant may refuse to enter into Market Transactions for the Client, or limit the Market Transactions it enters into for the Client, that the Market Participant will notify the Client of any refusal or limitation as soon as practicable;
(o) that money or property, other than property to which Division 3 of Part 7.8 of the Corporations Act applies, deposited with, or received by, the Market Participant in connection with dealings in Futures Market Contracts and Options Market Contracts for the Client will be segregated by the Market Participant in accordance with the Market Operating Rules and the Corporations Act; and
(p) that the Client’s monies and the monies of other clients will or may, as applicable, be combined and deposited by the Market Participant in a clients’ segregated account and may be used by the Market Participant to meet the default of any client of the Market Participant.

(2) The Market Participant must set out in a Client Agreement entered into under subrule (1) any minimum period of notice to terminate the agreement and any other limitations on the right to terminate the agreement.

Maximum penalty: $100,000

3.1.7 Minimum terms of Client Agreement for Options Market Contracts

(1) Before entering into a Market Transaction in respect of an Options Market Contract on behalf of a Retail Client (the “Client”), the Market Participant must enter into a written agreement with the Client under which:

the Client and the Market Participant agree on the instruments (the “ASX Derivatives Market Contracts”) in which the Market Participant may deal on behalf of the Client;

(b) the Client acknowledges that the Client has received and read a copy of any current explanatory booklets published by the Market Operator in respect of the ASX Derivatives Market Contracts;
(c) the Client acknowledges that the Client is acting:

  as principal; or

  (ii) as an intermediary on another’s behalf and are specifically authorised to transact the ASX Derivatives Market Contracts by the terms of:

  a licence held by the Client;

  a trust deed (if the Client is a trustee); or
  an agency contract;

(d) the Market Participant discloses, and the Client acknowledges:

  that notwithstanding that the Market Participant may act in accordance with the instructions of, or for the benefit of, the Client, any contract arising from any order submitted to the Market, is entered into by the Market Participant as principal;

  (ii) that the Market Participant may, in certain circumstances permitted under the Market Operating Rules or the Corporations Act, take the opposite position in a transaction in the ASX Derivatives Market Contracts, either acting for another person or on its Own Account;
  (iii) if the Client will or may be required to pay to the Market Participant commissions, fees, taxes or charges in connection with dealings in the ASX Derivatives Market Contracts for the Client:

  the fact that the Client is required to pay such commissions, fees, taxes and charges; and

  (B) the manner in which the Client will be notified of the rates of such commissions, fees, taxes and charges;
  (iv) that the Market Participant may record telephone conversations between the Client and the Market Participant and if there is a dispute between the Client and the Market Participant, the Client has the right to listen to any recording of those conversations;
  (v) if the Market Participant may refuse to enter into Market Transactions for the Client, or limit the Market Transactions it enters into for the Client, that the Market Participant will notify the Client of any refusal or limitation as soon as practicable;
  (vi) that the Trading Participant is not required to act in accordance with the Client’s instructions, where to do so would constitute a breach of the Market Operating Rules, the Clearing Rules or the Corporations Act;
  (vii) that each Options Market Contract registered with a Clearing Facility is subject to operating rules and any practices, directions, decisions and requirements of that Clearing Facility.

(2) The Market Participant must set out in a Client Agreement entered into under subrule (1) any minimum period of notice to terminate the agreement and any other limitations on the right to terminate the agreement.

Maximum penalty: $100,000

3.1.8 Client Agreement for Warrants

(1) Before entering into a Market Transaction in respect of Warrants on behalf of a Retail Client (the “Client”), subject to subrule (3), the Market Participant must enter into a written agreement with the Client under which the Market Participant discloses, and the Client acknowledges that they are aware that:

a Warrant has a limited life and cannot be traded after its expiry date;

(b) Warrants do not have standardised Terms of Issue and it is the responsibility of the Client to become aware of the Terms of Issue of any Warrant in which the Client chooses to invest; and
(c) Warrants may be subject to adjustments after their initial issue and it is the Client’s responsibility to become aware of any adjustments which may have been made to any Warrant in which the Client chooses to invest.

(2) The written agreement referred to in subrule (1) must include an acknowledgement from the Client that the Client has received and read a copy of any current explanatory booklet issued by the Market Operator in respect of Warrants.

(3) A Market Participant is not required to enter into an agreement under subrule (1) before entering into a Market Transaction to sell Warrants.

(4) A Market Participant is not required to comply with subrules (1) and (2) if the Market Participant is a participant of the market operated by Chi-X Australia Pty Ltd (ACN 129 584 667) and the Market Participant has a written agreement with the Client under Rule 3.1.8 of the ASIC Market Integrity Rules (Chi-X Australia Market) 2011.

Note: Subrule (4) does not affect a Market Participant’s obligation to give a Client a copy of an explanatory booklet under Rule 3.1.2.

Maximum penalty: $100,000

3.1.9 Client Agreement for Partly Paid Securities

(1) Before entering into a Market Transaction in respect of Partly Paid Securities on behalf of a Retail Client (the “Client”), subject to subrule (2), the Market Participant must enter into a written agreement with the Client under which the Market Participant discloses, and the Client acknowledges that they are aware, that:

a Partly Paid Security is a security which may require the Client to make a further payment or payments at some time in the future;

(b) it is the responsibility of the Client to obtain and read a copy of the prospectus, product disclosure statement or information memorandum issued by an Issuer which sets out the particular features of, and rights and obligations attaching to, a Partly Paid Security before the Client places an order to buy a Partly Paid Security;
(c) the Client may be required to make further payments on a Partly Paid Security and that a failure to make a further payment by the specified date(s) may result in an Issuer of a Partly Paid Security or their associates or agents taking action, including legal action, against the Client to recover the outstanding payments and/or may result in the forfeiture of the Client’s entitlement to the Partly Paid Security;
(d) in certain circumstances the Client may be required to make a further payment on a Partly Paid Security despite the fact that the Client may have disposed of a Partly Paid Security prior to the date that a further payment falls due;
(e) the Client should monitor announcements made by the Issuer of a Partly Paid Security and that it is the responsibility of the Client to inform themselves of the dates or circumstances that a further payment falls due and the last day that the Client can dispose of the Partly Paid Security before the Client becomes required to make a further payment;
(f) the amount of a further payment may be unrelated to the financial performance of a Partly Paid Security and that the amount of the further payment may exceed the intrinsic value of a Partly Paid Security at the time a further payment falls due.

(2) A Market Participant is not required to enter into an agreement under subrule (1) before entering into a Market Transaction to sell Partly Paid Securities.

Maximum penalty: $100,000

3.1.10 Other terms of Client Agreements

For the avoidance of doubt, a Client Agreement may include other disclosures, acknowledgements, terms and conditions agreed between the Market Participant and the Client, or required to be included under the Market Operating Rules, provided they are not inconsistent with the requirements of Rules 3.1.6, 3.1.7, 3.1.8 and 3.1.9.

Note: There is no penalty for this Rule.

3.1.11 Market Participant to keep copy of Client Agreement and disclosures

The Market Participant must retain a copy of each Client Agreement and any disclosures made under this Part for at least 7 years following the date on which the Client Agreement, or the arrangement the subject of the disclosure, is terminated.

Maximum penalty: $100,000

3.1.12 Client agreement where Market Participant is not the Clearing Participant (Options Market Transactions only)

Before entering into an Options Market Transaction for a person (the “Client”), where the Market Participant:

is not a Clearing Participant, who is permitted under the Clearing Rules to clear that Options Market Transaction; or

(b) is a Clearing Participant, who is permitted under the Clearing Rules to clear that Market Transaction, but has an arrangement with another Clearing Participant to clear that Options Market Transaction, and such transaction is cleared under the arrangement,

the Market Participant must:

have previously confirmed with the Clearing Participant that the Client has entered into an agreement with the Clearing Participant as required under the Clearing Rules; or

(d) where the Client is a Wholesale Client, have satisfied itself that the Client has executed and lodged with the Clearing Facility a Wholesale Client Agreement as required under the Market Operating Rules.

Maximum penalty: $100,000

3.1.13 Client agreement where Market Participant is the Clearing Participant (Options Market Transactions only)

Before entering into an Options Market Transaction for a person (the “Client”), where the Market Participant is the Clearing Participant in relation to the Options Market Transaction, the Market Participant must:

have entered into an agreement with the Client as required under the Clearing Rules; or

(b) where the client is a Wholesale Client, have satisfied itself that the Client has executed and lodged with the Clearing Facility a Wholesale Client Agreement as required under the Market Operating Rules.

Maximum penalty: $100,000

Part 3.2 Trading as Principal

3.2.1 Application

This Part 3.2 applies where a Market Participant enters into a Market Transaction with a Client as Principal, except where the Client is a Market Participant or a participant or member of a Recognised Stock Exchange.

Note: There is no penalty for this Rule.

3.2.2 Disclosure and consent

Before entering into a Market Transaction as Principal with a person (the “Client”), the Market Participant must disclose, or have previously disclosed, in accordance with paragraph 991E(1)(c) of the Corporations Act, that it is acting, or may act, as Principal and have obtained the consent of the Client, in accordance with paragraph 991E(1)(d) of the Corporations Act.

Maximum penalty: $100,000

3.2.3 Confirmation must include disclosure

When a Market Participant enters into a Market Transaction with a person (the “Client”) as Principal, the confirmation issued by the Market Participant to the Client under Rule 3.4.1 in respect of that Market Transaction must state that the Market Participant entered into the transaction as Principal and not as agent.

Maximum penalty: $100,000

3.2.4 Brokerage and commission

(1) When a Market Participant enters into a Market Transaction as Principal with a person (the “Client”), the Market Participant must not charge the Client brokerage, commission or any other fee in respect of the Market Transaction, except in the following circumstances:

where the Client is a Prescribed Person of the Market Participant;

(b) where the Client is a Wholesale Client who has consented to the Market Participant charging brokerage, commission or the other fee (and that consent has not been withdrawn); or
(c) where otherwise permitted by the Corporations Act.

(2) The Market Participant must keep a written record of any consent given by a Wholesale Client under paragraph (1)(b), and send a copy of the record to that Wholesale Client as soon as practicable.

Maximum penalty: $100,000

3.2.5 Extended meaning of dealing as Principal

(1) Except where a Market Participant is dealing as a trustee of a trust in which the Market Participant has no direct or indirect beneficial interest, a reference in this Part 3.2 to a Market Participant dealing or entering into a Market Transaction as Principal, includes a reference to a Market Participant entering into a Market Transaction on its own behalf or on behalf of any of the following persons:

a partner of the Market Participant;

(b) a director, company secretary or Substantial Holder of the Market Participant;
(c) the Immediate Family, Family Company or Family Trust of a partner, director, company secretary or Substantial Holder of the Market Participant;
(d) a body corporate in which the interests of one or more of the partners singly or together constitute a controlling interest;
(e) any Related Body Corporate of the Market Participant, except where that Related Body Corporate is dealing as a trustee of a trust in which it, or the Market Participant, has no direct or indirect beneficial interest.

(2) Without limitation, in paragraph (1)(b), a reference to dealing on behalf of a Substantial Holder means that any Cash Market Product the subject of the Market Transaction is, or will be on the execution of the transaction, beneficially owned by the Substantial Holders.

(3) For the purposes of subrule (2), Cash Market Products beneficially owned by a Substantial Holder include Cash Market Products that appear or would appear as assets on the balance sheet or consolidated balance sheet of that Substantial Holder’s assets and liabilities, except where the Cash Market Products concerned appear or would appear as assets on the balance sheet or consolidated balance sheet of a life insurance company registered under the Life Insurance Act 1995 or the equivalent Act of a State, and are held for or on behalf of that life insurance company’s statutory funds.

Note: There is no penalty for this Rule.

3.2.6 Register of persons who are regarding as Principal

A Market Participant must keep a register of the persons referred to in paragraphs 3.2.5(1)(a) to (e).

Maximum penalty: $100,000

Part 3.3 Client instructions

3.3.1 Market Participant restrictions

A Market Participant must not:

accept or execute instructions from a person (a “Client”) to enter into a Market Transaction except in accordance with these Rules, the Competition Market Integrity Rules and the Market Operating Rules;

(b) enter into a Market Transaction for a Client, except in accordance with the instructions of the Client, or of a person authorised in writing by a Client to give such instructions, or pursuant to an exercise of discretion in respect of that particular Client’s Managed Discretionary Account or as otherwise permitted by these Rules or the Market Operating Rules;
(c) allocate a Market Transaction to a Client’s account unless the Market Transaction was entered into on the instructions of the Client, or of a person authorised in writing by a Client to give such instructions, or pursuant to an exercise of discretion in respect of that particular Client’s Managed Discretionary Account or as otherwise permitted by these Rules or the Market Operating Rules; or
(d) except as permitted under these Rules, the Competition Market Integrity Rules or the Market Operating Rules, or in writing by ASIC, enter into or arrange a Market Transaction on the instructions of a Client unless the instructions are executed in such a manner that the Market Transaction is entered into on a Trading Platform.

Maximum penalty: $1,000,000

3.3.2 Excessive trading

A Market Participant must not enter into Market Transactions on a Managed Discretionary Account for a Retail Client where the size or frequency of the Market Transactions may be considered excessive having regard to the investment objectives, financial situation and needs of the client and the relevant markets.

Maximum penalty: $1,000,000

Part 3.4 Reporting to Clients

3.4.1 Confirmations—Form and timing

(1) Subject to Rule 3.4.3, a Market Participant must give a confirmation to a person (the “Client”) in respect of each Market Transaction entered into on the Client’s instructions or on the Client’s Managed Discretionary Account.

(2) The Market Participant must send to, or cause to be sent to, the Client a confirmation:

in writing;

(b) electronically; or
(c) in another form permitted by ASIC,

as soon as practicable after the Market Participant enters into the Market Transaction.

(3) The confirmation must meet the following requirements:

the confirmation must include all of the information required to be included in a confirmation under Division 3 of Part 7.9 of the Corporations Act;

(b) the confirmation must include a statement that the confirmation is issued subject to:

  the directions, decisions and requirements of the Market Operator, these Rules, the Market Operating Rules, the Clearing Rules and where relevant, the Settlement Rules;

  (ii) the customs and usages of the Market; and
  (iii) the correction of errors and omissions,

unless the Market Participant has obtained and retained an acknowledgment from the Client that the conditions set out in subparagraphs (i), (ii) and (iii) apply to the issue of confirmations to that Client;

(c) if the Market Transaction is to be cleared by another party which is a Clearing Participant, the confirmation must include the name of the Market Participant which executed the trade and the Clearing Participant which clears it;
(d) the confirmation must state the time by which all documents and information which the Market Participant or Clearing Participant will require to settle the Market Transaction must be provided by the Client:

  in the case of a sale of Cash Market Products, the date by which the Client must provide all documents and security holder information (including, if applicable, the relevant holder identification number or personal identification number and/or shareholder reference number) required by the relevant Clearing Participant to meet its Clearing Obligations; and

  (ii) if applicable, the date by which the Client must provide the consideration specified in the confirmation; and
  (iii) if applicable, the date by which the net consideration to the Client falls due;
(e) the confirmation must state the amount of money which the Client must pay, or which the Client will receive, on settlement of the Market Transaction and, if the Client is required to pay an amount of money, the time by which that money must be paid;
(f) where the Market Transaction involved a Crossing, the confirmation must include a statement to that effect;
(g) the confirmation must include any disclosure required under Rule 3.2.3; and
(h) if the confirmation is a confirmation in respect of:

  a Conditional Sale of a Cash Market Product and the corresponding confirmation in respect of the conditional purchase of the relevant Cash Market Product; or

  (ii) the entry into of an Options Market Contract over a Cash Market Product which is, at the time, traded on a conditional basis,
the confirmation must be endorsed as conditional and state the condition and the effect of non-fulfilment of the condition.

Maximum penalty: $100,000

3.4.2 Confirmations—accumulation and price averaging

If a Market Participant is required by Rule 3.4.1 to give a confirmation to a person (the “Client”) and the Market Participant enters into multiple Market Transactions for the purpose of completing the Client’s order, the Market Participant may accumulate those Market Transactions on a single confirmation and specify the volume weighted average price for those Market Transactions provided that:

the Client authorised in writing the accumulation and price averaging of 2 or more Market Transactions in a confirmation at or before the time the order was placed; and

(b) if requested by the Client, the Market Participant gives to the Client a statement of all the individual prices of the Cash Market Products or Derivatives Market Contracts, as applicable, which are accumulated and averaged under this Rule.

Maximum penalty: $20,000

3.4.3 Confirmations—clients other than Retail Clients

(1) A Market Participant is not required to comply with Rule 3.4.1 in respect of a client that is not a Retail Client, provided the Market Participant:

(a) has notified the client before entering a Trading Message on the client’s behalf that Market Transactions effected for the client are subject to:

  (i) the directions, decisions and requirements of the Market Operator, these Rules, the Market Operating Rules, the Clearing Rules and where relevant, the Settlement Rules;
  (ii) the customs and usages of the Market; and
  (iii) the correction of errors and omissions; and

(b) subject to subrule (2), notifies the client as soon as practicable:

  (i) if the Market Participant entered into the client’s Market Transaction as Principal; that the Market Participant entered into the Market Transaction as Principal; and
  (ii) if the client’s Market Transaction was executed as a Crossing, the execution code of the execution venue for the Crossing.

(2) A Market Participant does not have to give the notifications in paragraph (1)(b) to a client who has agreed not to receive such notifications.

(3) A Market Participant must keep a record of the notification referred to in paragraph (1)(a).

(4) ASIC may determine and publish on its website a notification of the execution venue codes referred to in subparagraph (1)(b)(ii).

(5) A Market Participant is not required to comply with paragraph (1)(b) until 28 October 2014.

Maximum penalty: $100,000

Part 3.5 Client Money and Property

3.5.1 Trust accounts—Cash Market Transactions and Options Market Transactions

A Market Participant must establish one or more clients’ trust accounts for money received by the Market Participant in connection with dealings in Cash Market Transactions or Options Market Transactions.

Maximum penalty: $1,000,000

3.5.2 Segregated accounts or trust accounts—Futures Market Transactions

A Market Participant must establish either one or more clients’ trust accounts or clients’ segregated accounts for money received by the Market Participant in connection with dealings in:

Futures Market Transactions; and

(b) Options Market Transactions over an Underlying Financial Product which is a Futures Market Contract.

Maximum penalty: $1,000,000

3.5.3 Bank accounts to be with Australian ADI

All money received by a Market Participant which the Corporations Act requires the Market Participant to deposit in a clients’ segregated account or in a clients’ trust account must be deposited in an account with an Australian ADI in Australia (which has been rated by an Approved Ratings Agency as being at least short term investment grade) unless:

the money is received by the Market Participant in another country and the Market Participant deposits the money in a clients’ segregated account or clients’ trust account with a branch of an Australian ADI with such a rating in that country; or

(b) Rule 3.5.4 applies.

Maximum penalty: $1,000,000

3.5.4 Approved foreign banks

(1) ASIC may approve, in writing, foreign banks at which Market Participants may:

open clients’ segregated accounts or clients’ trust accounts for the handling of money received for a person in another country or for a person who is resident in another country; and

(b) invest money held in clients’ segregated accounts or clients’ trust accounts in another country.

(2) ASIC may impose conditions on the use of a foreign bank approved under subrule (1) for clients’ segregated accounts and clients’ trust accounts.

Note: There is no penalty for this Rule.

3.5.5 Change of rating or approval of ADI

If the Market Participant has a clients’ segregated account or a clients’ trust account with an Australian ADI which ceases to have the rating referred to in Rule 3.5.3 or with a foreign bank which ceases to be a bank approved under Rule 3.5.4, the Market Participant must transfer the balance of the relevant account to an entity which meets the requirements of Rule 3.5.3 or Rule 3.5.4, as applicable.

Maximum penalty: $1,000,000

3.5.6 Liquidity requirement—clients’ segregated accounts—Futures Market Transactions

If a Market Participant invests money from a clients’ segregated account maintained under Rule 3.5.2 pursuant to paragraph 981C(a) of the Corporations Act, that investment must be readily realisable and at least 50% of money invested under that paragraph must be invested on 24 hour call terms.

Maximum penalty: $1,000,000

3.5.7 Top up requirement—clients’ segregated accounts—Futures Market Transactions

(1) Subject to subrule (2), if a person (the “Client”) does not satisfy, either through payment or the provision of security, a request by the Market Participant to meet:

an Initial Margin call in relation to positions in Futures Market Transactions held by the Market Participant on behalf of the Client; or

(b) a call in relation to the close out, settlement or daily settlement of Open Contracts,

within 48 hours following the call for payment, the Market Participant must pay into the clients’ segregated account the lesser of:

the amount of the request; or
the amount which the Market Participant would be obliged under the Market Operating Rules to request from the Client on the following day.

(2) Where the request by a Market Participant for payment or the provision of security relates to derivatives traded on a market operated by a person other than the Market Operator, the Market Participant must by the time required under the rules of that market, pay into the clients’ segregated account the lesser of:

the amount of the request; or

(b) the amount which the Market Participant would be obliged under the operating rules of the other market to request from the Client on the following day.

Maximum penalty: $1,000,000

3.5.8 Reconciliation of clients’ segregated accounts

(1) A Market Participant must perform an accurate reconciliation, by 7.00pm on the Trading Day after the Trading Day to which the reconciliation relates, of the aggregate balance held by it at the close of business on each Business Day in clients’ segregated accounts maintained pursuant to Rule 3.5.2 and the corresponding balance as recorded in the Market Participant’s accounting records.

(2) The reconciliation referred to in subrule (1) must set out:

the date to which the reconciliation relates;

(b) the dollar amounts of:

  Total Futures Client Monies;

  (ii) Associated/Related Company Monies;
  (iii) Director/Employee Monies;
  (iv) Total Third Party Client Monies,
for both the day of the reconciliation and the prior day;
(c) the dollar amounts of:

  clients’ segregated account at bank;

  (ii) Deposits with ASX Clear Client Account;
  (iii) Deposits with ASX Clear (Futures) Client Account;
  (iv) Deposits with ASX Clear Futures Clearing Participant;
  (v) Deposits with ASX Clear (Futures) Participant;
  (vi) Deposits with an ASX Market Participant;
  (vii) Deposits with an Australian Securities Exchange Participant;
  (viii) Deposits with an Overseas Broker;
  (ix) funds invested in accordance with paragraph 981C(a) of the Corporations Act;
  (x) Total Deposits,
for both the day of the reconciliation and the prior day;
(d) the dollar amount of the Variation for both the day of the reconciliation and the prior day;
(e) an explanation of the reason for a Variation, if the dollar amount of the Variation is more than, or less than, zero;
(f) where the movement in Total Futures Client Monies is greater than 20% from the prior day, an explanation of the reason.

(3) For the purposes of this Part:

“Associated/Related Company Monies” means the total amount of money received from:

any body corporate that is related to the Market Participant;

(b) any person who is associated with the Market Participant; and
(c) any body corporate in which the Market Participant has a controlling interest,

in respect of transactions in futures contracts dealt on any exchange.

“ASX Clear” means ASX Clear Pty Limited.

“ASX Clear (Futures)” means ASX Clear (Futures) Pty Limited.

“Australian Securities Exchange” means Australian Securities Exchange Limited.

“Client” means a person (including any director, officer, employee or associated or related company of the Market Participant) on behalf of whom the Market Participant deals, or from whom the Market Participant accepts instructions to deal, in futures contracts.

“Clients’ Segregated Account at Bank” means the Total Third Party Client Monies held in the clients’ segregated account relating to futures contracts traded on any exchange.

“Deposits with ASX Clear Client Account” means the total amount of third-party client funds, including margin amounts, lodged with ASX Clear in relation to transactions in futures contracts.

“Deposits with ASX Clear (Futures) Client Account” means the total amount of third-party client funds, including margin amounts, lodged with ASX Clear (Futures) in relation to transactions in futures contracts.

“Deposits with ASX Clear Futures Clearing Participant” means the total amount of third-party client funds paid to a Clearing Participant of ASX Clear in relation to transactions in futures contracts.

“Deposits with ASX Clear (Futures) Participant” means the total amount of third-party client funds paid to a participant of ASX Clear (Futures) in relation to transactions in futures contracts.

“Deposits with an ASX Market Participant” means the total amount of third-party client funds paid to another Market Participant.

“Deposits with an Australian Securities Exchange Participant” means the total amount of third-party client funds paid to a participant of Australian Securities Exchange in relation to transactions in futures contracts.

“Deposits with an Overseas Broker” means the total amount of third-party client funds lodged with an Overseas Broker in relation to transactions in futures contracts.

“Director/Employee Monies” means the total amount of money received from:

any director, or officer, of the Market Participant; and

(b) any employee of the Market Participant;

in respect of transactions in futures contracts dealt on any exchange.

“Total Deposits” means the sum of subparagraphs (2)(c)(i) to (c)(ix).

“Total Futures Client Monies” means the total amount of money received from Clients in respect of transactions in futures contracts, including amounts relating to futures contracts traded on any exchange.

“Total Third Party Client Monies” means:

Total Futures Client Monies less (Associated/Related Company Monies plus Director/Employee Monies)

“Variation” means:

Total Third Party Client Monies less Total Deposits

(4) The reconciliation must contain a statement signed by a Responsible Executive or a person authorised in writing by a Responsible Executive, stating that the signatory believes, and has no reason not to believe, that the reconciliation is accurate in all respects.

Maximum penalty: $1,000,000

3.5.9 Reconciliation of trust accounts

(1) A Market Participant must perform a reconciliation of:

the aggregate balance held by it at the close of business on each Business Day in clients’ trust accounts maintained pursuant to Rule 3.5.1 or 3.5.2 and the corresponding balance as recorded in the Market Participant’s accounting records; and

(b) the balance held by it at the close of business on the last Business Day of each week on trust for each person on whose behalf money is held in a trust account maintained pursuant to Rule 3.5.1 or 3.5.2 and the corresponding balance as recorded in the Market Participant’s accounting records,

that:

is accurate in all respects; and

(d) contains a statement signed by a Responsible Executive or a person authorised in writing by a Responsible Executive, stating that the signatory believes, and has no reason not to believe, that the reconciliation is accurate in all respects.

(2) The Market Participant must perform the reconciliation referred to in subrule (1) by 7.00pm on the Trading Day after the Trading Day to which the reconciliation relates.

Maximum penalty: $1,000,000

3.5.10 Obligation to notify ASIC in respect of reconciliation

A Market Participant must notify ASIC, in writing, within 2 Business Days if:

a reconciliation has not been performed in accordance with Rule 3.5.8;

(b) a reconciliation has not been performed in accordance with Rule 3.5.9;
(c) according to a reconciliation performed pursuant to Rule 3.5.8, Total Deposits is less than Total Third Party Client Monies; or
(d) according to a reconciliation performed pursuant to Rule 3.5.9, there is a deficiency of funds in its trust accounts (or, in respect of a reconciliation performed pursuant to paragraph 3.5.9(1)(b), a deficiency in respect of any particular person on whose behalf money is held in the trust account) or if it is unable to reconcile its trust accounts pursuant to Rule 3.5.9.

Maximum penalty: $100,000

3.5.11 Schedule of trust amounts

Each Market Participant must by no later than 5 Business Days after 31 March, 30 June, 30 September and 31 December in each year cause to be prepared a schedule as at the above dates showing the respective amounts held in the Market Participant’s trust account on behalf of clients together with the names of the particular client in respect of each amount.

Maximum penalty: $100,000

Part 3.6 Prohibition of advice to Client

3.6.1 Definition used in this Part 3.6

For the purposes of this Part 3.6, “Client” includes a shareholder in a company which constitutes the Market Participant.

Note: There is no penalty for this Rule.

3.6.2 Market Participant possesses information that is not generally available

Where as a result of its relationship to a Client, a Market Participant is in possession of information that is not generally available in relation to a Financial Product and which would be likely to materially affect the price of that Financial Product if the information was generally available, that Market Participant must not give any advice to any other Client of a nature that would damage the interest of either of those Clients.

Maximum penalty: $1,000,000

3.6.3 Chinese Walls in place

For the purposes of Rule 3.6.2, a Market Participant is not regarded as having possession of information that is not generally available in relation to a Financial Product where:

that Market Participant has in place arrangements whereby information known to persons included in one part of the business of the Market Participant is not available, directly or indirectly, to those involved in another part of the business of the Market Participant;

(b) it is accepted that in each of the parts of the business of the Market Participant so divided, decisions will be taken without reference to any interest which any other such part or any person in any other such part of the business of the Market Participant may have in the matter; and
(c) the person advising the Client is not in possession of that information.

Note: There is no penalty for this Rule.

3.6.4 Certain actions do not constitute giving advice

For the purposes of Rule 3.6.2, a Market Participant or an Employee or partner of a Market Participant advising a Client that the Market Participant is precluded from giving the Client advice will not be regarded as giving advice.

Note: There is no penalty for this Rule.

Chapter 4: Records

Part 4.1 Trading records

4.1.1 Records of dealings for clients

(1) This Rule applies to a Market Participant who receives instructions to enter into a Market Transaction on behalf of a person (the “Client”), whether or not a Trading Message corresponding to those instructions is entered into or matched on a Trading Platform.

(2) Subject to Rule 4.1.7, in addition to complying with the requirements of the Corporations Act to the extent that those requirements apply to dealing in the Market, the Market Participant must maintain sufficiently detailed records showing:

particulars of the instructions, including, without limitation:

      the Financial Product to be bought or sold;

  (ii) the number thereof;
  (iii) any price or time related instructions;
  (iv) any time limit on the instructions;
  (v) the date and time the Market Participant received the instructions;
  (vi) instructions or decisions to purchase or sell Financial Products pursuant to a Managed Discretionary Account (including, without limitation, the Financial Products to be bought or sold and the number thereof, any price or time related instructions or decisions and the name of the person who generated the instruction or made the decision), whether the instruction or decision was executed or not; and
  (vii) the authority of the Client, if any, for accumulation and price averaging under Rule 3.4.2;
(b) the name of the Client;
(c) the name of the person who gave the instructions (or, if the Trading Message was received by Automated Order Processing, the information set out in Rule 5.5.3);
(d) any amendment of any kind to the instructions or Trading Message (including, without limitation, cancellation of an instruction or Trading Message, variation of the number of Financial Products to be bought or sold or variation of any price or time related instructions) including the date and time of any amendment to the instructions or Trading Message;
(e) the name of the person who received the instruction (or, if the Trading Message was received by Automated Order Processing, the information set out in Rule 5.5.3);
(f) the name of any other person who passed the instruction on between the person who initially received the instruction, and the Trading Platform and the date and time they passed it;
(g) the name of the DTR who entered a Trading Message into a Trading Platform (or, if the Trading Message was submitted by Automated Order Processing, the information set out in Rule 5.5.3);
(h) the time the DTR entered a Trading Message into a Trading Platform (or if the Trading Message was submitted by Automated Order Processing, the time at which the Trading Message was initiated by the Open Interface Device);
(i) if the Trading Message gives rise to a Market Transaction, the date and time that occurs; and
(j) the Derivatives Market Contracts arising from instructions that are nominated for accumulation and price averaging under the Clearing Rules.

Maximum penalty: $100,000

4.1.2 Records of dealings on Own Account

(1) This Rule applies to a Market Participant that makes a decision, or gives instructions to, enter into a Market Transaction on its Own Account, whether or not the Market Transaction is executed.

(2) Subject to Rule 4.1.8, the Market Participant must, in addition to complying with the requirements of the Corporations Act to the extent that those requirements apply to dealing in the Market provided by the Market Operator, maintain sufficiently detailed records showing:

particulars of the decision or instructions, including, without limitation:

      the name of the person who generated the instruction or made the decision;

  (ii) the Financial Products to be bought or sold;
  (iii) the number thereof;
  (iv) any price or time related instructions or decisions; and
  (v) any time limit on the instruction;
(b) any amendment of any kind to the instructions or Trading Message (including, without limitation, cancellation of an instruction or Trading Message, variation of the number of Financial Products to be bought or sold or variation of any price or time related instructions), including the date and time of any amendment to the instruction or Trading Message;
(c) the name of any other person who passed the instruction on between the person who initially gave the instruction or made the decision, and a Trading Platform and the date and time they passed it;
(d) the name of the DTR who entered a Trading Message into a Trading Platform (or if the Trading Message was submitted by Automated Order Processing, the information set out in Rule 5.5.3);
(e) the time the DTR entered a Trading Message into a Trading Platform (or if the Trading Message was submitted by Automated Order Processing, the time at which the Trading Message was initiated by the Open Interface Device); and
(f) if the Trading Message gives rise to a Market Transaction, the date and time that occurs.

Maximum penalty: $100,000

4.1.3 Records to be made immediately

A Market Participant must make the records referred to in Rules 4.1.1, 4.1.2, 4.1.7 and 4.1.8 immediately after the event to which they relate and record the time of the relevant event.

Maximum penalty: $100,000

4.1.4 Records to be retained for prescribed period

A Market Participant must retain the records referred to in Rules 4.1.1, 4.1.2, 4.1.7 and 4.1.8 for 7 years from the date the record is made.

Maximum penalty: $100,000

4.1.5 Certain records maintained by the Market Operator

Where a Market Participant is a Trading Participant, certain of its obligations under Rules 4.1.1 and 4.1.2 may be met by relying on records maintained electronically as set out in Rule 4.1.6.

Note: There is no penalty for this Rule.

4.1.6 Conditions for reliance on the Market Operator records

(1) Where the records of the Trading Participant:

are able to connect the DTR identifier with the particular DTR; and

(b) identify the person, or any other persons, receiving the instructions, generating an order or making a decision (if not the DTR) and a DTR is capable of being connected to a particular Trading Record or sequence of events,

a Trading Participant may:

when dealing for clients satisfy certain of its obligations in relation to paragraphs 4.1.1(2)(g), 4.1.1(2)(h) and 4.1.1(2)(i); or

(d) when dealing on its Own Account, satisfy certain of its obligations in relation to subparagraphs 4.1.2(2)(a)(i) to (iv), paragraphs 4.1.2(2)(b), 4.1.2(2)(d), 4.1.2(2)(e) and 4.1.2(2)(f),

by relying on records maintained by the Market Operator, but only to the extent permitted by subrule (2).

(2) For the purposes of subrule (1), the Market Participant may satisfy the obligation specified in column 1 of the following table by relying on records maintained by the Market Operator in the circumstances specified in column 2 of the following table:

Note: There is no penalty for this Rule.

4.1.7 Records of dealings for clients by a Market Participant who instructs another Trading Participant to execute the dealings

A Market Participant that instructs another Trading Participant to enter into a Market Transaction on behalf of a person:

need not comply with paragraphs 4.1.1(2)(e), (f), (g), (h), (i) and (j) in respect of that instruction;

(b) must maintain sufficiently detailed records in respect of such instruction showing:

  the name of the person who received the instructions;

  (ii) the name of any person who passed the instruction on between the person who initially received the instruction and the person instructing the Trading Participant to enter into the Market Transaction;
  (iii) the name of the person who instructed such Trading Participant to enter into the Market Transaction; and
  (iv) the time the person instructed such Trading Participant to enter into the Market Transaction.

Maximum penalty: $100,000

4.1.8 Records of dealings on its Own Account by a Market Participant who instructs another Trading Participant to execute the dealings

A Market Participant (whether or not it is a Trading Participant) that instructs a Trading Participant to enter into a Market Transaction on its behalf:

need not comply with paragraphs 4.1.2(2)(c), (d), (e) and (f) in respect of that instruction; and

(b) must maintain sufficiently detailed records in respect of such instruction showing:

  the name of any person who passed the instruction on between the person who initially gave the instruction or made the decision and the Trading Participant instructed to enter into the Market Transaction;

  (ii) the name of the person who instructed such Trading Participant to enter into the Market Transaction; and
  (iii) the time the person instructed such Trading Participant to enter into the Market Transaction.

Maximum penalty: $100,000

4.1.9 Records regarding Authorised Persons

A Trading Participant must maintain records of:

the name and contact details of an Authorised Person, and if that Authorised Person is an agent of another person, the details of that other person; and

(b) the security arrangements regarding access by the Authorised Person to a computer or other device connected to the Trading Participant’s Open Interface Device and its location or if not fixed, the method of identifying the computer or other device,

for a period of 7 years from the date the person ceases to be an Authorised Person.

Maximum penalty: $100,000

4.1.10 Telephone recording of client dealings—Futures Market Transactions

(1) A Market Participant must record, by tape, telephone lines or other electronic device, all telephone conversations with clients in relation to its dealings in Futures Market Transactions including, without limitation, conversations relating to the receipt, transaction and confirmation of orders.

(2) The Market Participant must retain the records referred to in subrule (1) for at least 3 months.

Maximum penalty: $100,000

Part 4.2 Records—General

4.2.1 General recordkeeping requirements

(1) A Market Participant must maintain accurate records in sufficient detail to show particulars of:

all money received or paid by the Market Participant, including trust account receipts and payments in a manner usual for a business of the kind being carried on by a Market Participant;

(b) all transactions by the Market Participant with or for the account of:

  a person of a type described in Rule 5.4.1 or a Related Party;

  (ii) other Market Participants; and
  (iii) members of any overseas stock exchange;
(c) all income from commissions, interest and other sources and all expenses, commissions and interest paid;
(d) all assets and liabilities, including contingent liabilities of the Market Participant;
(e) all Cash Market Products and Derivatives Market Contracts which are the property of the Market Participant, showing by whom they, or the documents of title to them, are held and if held otherwise than by the Market Participant, whether they are held as security for loans or advances;
(f) all Cash Market Products and Derivatives Market Contracts which are not the property of the Market Participant but for which the Market Participant or any nominee controlled by it is accountable, showing by whom and for whom such Financial Products and Derivatives Market Contracts are held and:

  in respect of those which are held for safe custody details sufficient to identify such Cash Market Products and Derivatives Market Contracts;

  (ii) in respect of those which are held for any person or firm or corporation as security for loans or advances made by the Market Participant details sufficient to identify such Cash Market Products and Derivatives Market Contracts;
(g) all dealings in Derivatives Market Contracts by the Market Participant and all fees (option moneys) arising there-from and any related covering transactions;
(h) all confirmations issued by the Market Participant and details of any statements and specifications which are required by these Rules, the Market Operating Rules and the Corporations Act to appear on confirmations; and
(i) all underwriting transactions entered into by the Market Participant.

(2) All Cash Market Products and Derivatives Market Contracts held for safe custody or whose certificates are held for safe custody must either be registered in the name of the client or the Market Participant’s nominee.

(3) The holding of Cash Market Products and Derivatives Market Contracts for security must be authorised in writing by the owner thereof or some other person lawfully authorised to do so.

(4) An authority referred to in subrule (3) must specify the period for which such Cash Market Products and Derivatives Market Contracts or documents of title may be held.

Maximum penalty: $100,000

4.2.2 Client complaints—Records of complaints and correspondence

(1) A Market Participant must keep the following records of complaints received from clients:

a copy of all written complaints;

(b) a copy of all written correspondence between the Market Participant and the clients and a written summary of any oral communication in connection with a written complaint; and
(c) any correspondence or documents relating to the resolution of a complaint through any complaints resolution scheme.

(2) A Market Participant must keep the records referred to in subrule (1) in respect of a complaint for at least 5 years from the date of the last correspondence in respect of that complaint.

Maximum penalty: $1,000,000

Part 4.3 Access to records

4.3.1 Records to be in writing and in English

(1) A Market Participant must keep all of the records it is required to maintain under this Chapter 4, in writing and in the English language or in a manner which will enable them to be readily accessible by ASIC and readily converted into writing in the English language.

(2) A Market Participant must, if directed by ASIC in writing to do so, convert records maintained under this Chapter 4 into writing and into English.

(3) A Market Participant must comply with a direction given under subrule (2) by the time specified by ASIC when giving the direction.

Maximum penalty: $100,000

4.3.2 Records kept outside of Australia

(1) If the records which a Market Participant is required to maintain under this Chapter 4 are kept outside Australia:

the Market Participant must send, or cause to be sent, to Australia records which will enable true and fair financial statements to be prepared; and

(b) the Market Participant must, if directed by ASIC in writing to do so, produce any of its records in Australia.

(2) A Market Participant must comply with any direction given by ASIC under paragraph (1)(b) by the time specified by ASIC when giving the direction.

Maximum penalty: $100,000