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.
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.