ASIC Market Integrity Rules (Capital, Securities Markets) Barclays Capital Asia Limited Waiver 2022/516

The instrument introduces several key concepts that modify the standard framework of the Capital Rules for BCAL. The Alternative FX Position Risk Calculation is defined as a calculation of a foreign exchange position risk amount for a position in a Financial Instrument, other asset or liability (except an Excluded Asset or a foreign exchange contract hedging Excluded Assets) which is denominated in a currency other than Hong Kong dollars. The baseline under the Capital Rules is the FX Position Risk Calculation, which measures risk in Australian dollars. By permitting BCAL to substitute an alternative calculation using Hong Kong dollars as the reference currency, the instrument effectively changes the currency of risk measurement. The note in subrule 4(3) specifically allows BCAL to apply the Alternative FX Position Risk Calculation “in place of the FX Position Risk Calculation” wherever the latter is required,including when it is a component of a larger calculation such as Liquid Capital or Total Risk Requirement. The Limit is a threshold that BCAL must develop and maintain, taking into account the historical size of margin calls received from relevant clearing houses and any available counterparty risk mitigation measures. The Limit monitors BCAL’s Liquid Capital and its Total Risk Requirement. It is not a fixed number set by ASIC; BCAL designs it internally, subject to the two specified factors. When the Limit is exceeded, BCAL must immediately prepare a calculation of its Liquid Margin. Further thresholds trigger notification and reporting obligations: if Liquid Capital divided by Total Risk Requirement falls to 1.4 or below, BCAL must notify ASIC immediately and provide an Ad Hoc Risk‑Based Return within one Business Day; if it falls to 1.2 or below, BCAL must provide a daily Ad Hoc Risk‑Based Return. The Ad Hoc Risk‑Based Return is not defined in the instrument but is a form presumably analogous to the Monthly Risk‑Based Return and Annual Audited Risk‑Based Return referenced in the Capital Rules. Liquid Margin is a concept from the Capital Rules,the amount by which Liquid Capital exceeds the Total Risk Requirement (or vice versa, depending on the deficiency). The instrument also relies on several defined terms from the Capital Rules, such as Participant, Market, Liquid Capital, Total Risk Requirement, Excluded Asset, and Financial Instrument. The Financial Resources Return is the annual return BCAL submits to the SFC under Hong Kong law. The instrument gives BCAL the right to provide documents, returns, or declarations based on information or calculations prepared under this instrument, and any statement of compliance with the Capital Rules is qualified by the instrument. This means that a statement by BCAL that it complies with the Capital Rules is not false or misleading if the non‑compliance is covered by the waiver. The concepts of Monthly Risk‑Based Return and Risk‑Based Return Declaration mirror those in the Capital Rules but are placed under BCAL’s own regime with a monthly (instead of potentially more frequent) schedule and with the return prepared using Hong Kong accounting standards rather than Australian equivalents.

The direct addressee is BCAL alone. No other market participant, clearing house, or entity is granted waivers by this instrument. BCAL is a Hong Kong incorporated company, licensed by the SFC for Type 1 regulated activity (dealing in securities), and is a Participant of one or more Australian markets operated by ASX, Chi‑X, or other venues. Its role is strictly limited: it acts as a Participant only as agent on behalf of Barclays PLC or any of its subsidiaries. This restriction is a condition in section 6 for the waivers to apply. Therefore, BCAL cannot use the waivers if it ever trades as principal or for its own account in the Australian market. The instrument affects ASIC as the regulator responsible for monitoring compliance with the conditions and receiving the various returns and notifications. ASIC must process, review, and possibly follow up on Ad Hoc Risk‑Based Returns, monthly returns, annual accounts, and SFC filings. The clearing houses from which BCAL receives margin calls,likely ASX Clear or other central counterparties,are indirectly affected because BCAL’s Limit design takes into account the historical size of those margin calls. If BCAL mis‑estimates the Limit, there is a risk that the margin call data will be stale or insufficient, potentially affecting BCAL’s ability to meet capital requirements. The wider Barclays group is affected because BCAL’s role as an agent means the group may rely on BCAL to execute trades and manage risks in Australian markets. The group structure chart condition (paragraph 7(4)(f)) requires disclosure of the ownership chain and related entities involved in BCAL’s market participation, which extends the compliance burden to entities beyond BCAL itself (e.g., the ultimate parent Barclays PLC). Other market participants are affected indirectly. BCAL receives a compliance cost advantage relative to competitors who must comply with the standard rules without waivers. Competitors may view this as an uneven playing field: BCAL uses Hong Kong dollar FX calculations and Hong Kong accounting standards, potentially reducing the cost and complexity of regulatory compliance. However, BCAL also faces additional reporting triggers (Limit breaches, daily returns at 1.2 threshold) that do not apply to participants under the standard rules. The net effect on competition depends on whether the conditions are more or less burdensome than the standard rules. The instrument also affects the auditors and accountants engaged by BCAL to prepare the returns and declarations, who must navigate the hybrid regime of Hong Kong accounting standards, SFC filings, and ASIC risk‑based returns. Given that the instrument expires in 2030, all affected parties face a timeline after which BCAL must comply with the unmodified rules unless a new waiver is granted.

The instrument imposes a set of duties on BCAL and grants it rights to deviate from the standard rules. The primary right is the waiver itself: BCAL does not have to comply with the specific provisions listed in section 5, provided it satisfies the conditions in sections 6 and 7. This includes the right to use the Alternative FX Position Risk Calculation instead of the FX Position Risk Calculation wherever required, and the right to substitute Hong Kong statutory accounts, a different form of annual return, and SFC filings for the usual Australian‑style accounts and returns. However, these rights are contingent on BCAL fulfilling the duties in section 7.

The duties are structured around three main conditions. Condition 1 (subsection 7(1)) relates to the waiver from the Liquid Margin calculation rule (paragraph 9.2.2(1)(b) and related subparagraphs). BCAL must develop and maintain a Limit designed to monitor its Liquid Capital and Total Risk Requirement, taking into account historical clearing house margin calls and counterparty risk mitigation measures. If the Limit is exceeded, BCAL must immediately prepare a calculation of its Liquid Margin. If that calculation shows Liquid Capital divided by Total Risk Requirement is ≤ 1.4, BCAL must notify ASIC immediately and provide an Ad Hoc Risk‑Based Return within one Business Day. If it is ≤ 1.2, BCAL must provide an Ad Hoc Risk‑Based Return by 9:00 pm Sydney time each Business Day. This creates a graduated escalation in reporting frequency: from no requirement (when within Limit), to immediate prep and notification, to weekly returns, to daily returns. Condition 2 (subsection 7(2)) relates to the waiver from subparagraph 9.2.2(2)(b)(iii) (a component of the margin calculation). If BCAL’s net assets fall to zero or below at any time, it must provide an Ad Hoc Risk‑Based Return by 9:00 pm each Business Day. This is a severe trigger indicating insolvency risk. Condition 3 (subsection 7(3)) relates to the waiver from rule 9.2.3 (monthly risk‑based returns). BCAL must prepare and deliver to ASIC, by the 21st day of each calendar month, a Monthly Risk‑Based Return (reflecting the prior month’s financial position, prepared under Hong Kong accounting standards) and a Risk‑Based Return Declaration authorised by a director. Condition 4 (subsection 7(4)) relates to the waivers from subrule 9.2.4(1) and paragraph 4.3.2(1)(a) (annual audited returns and accounts). BCAL must deliver to ASIC within four months of its financial year end: (a) its Hong Kong statutory accounts (including directors’ declaration and auditor’s report) that give a true and fair view and are prepared under Hong Kong standards; (b) an unaudited return in substantially the same form as the Annual Audited Risk‑Based Return; (c) a Risk‑Based Return Declaration; (d) the annual Financial Resources Return and audit report submitted to the SFC; (e) a statement in Form 6 of Schedule 1C to the Capital Rules, signed by a director; and (f) a group structure chart showing the ownership chain from ultimate parent to related entities involved in market participation. These duties are not optional; the note to section 7 states that the conditions must be complied with for the waiver to be effective, per subrule 1.2.1(2) of both sets of rules.

BCAL also has the right, under subrule 4(3), to use the Alternative FX Position Risk Calculation in place of the standard one whenever the instrument requires an FX Position Risk Calculation. Under subrule 4(4), BCAL may provide any document, return, or declaration based on information or calculations prepared under the instrument, and any statement of compliance with the Capital Rules is automatically qualified by the instrument. This protects BCAL from being in breach of the standard rules for matters covered by the waiver.

The instrument itself does not create its own penalty provisions. It operates within the enforcement framework of the Capital Rules and the Securities Markets Rules. The critical mechanism is the conditionality expressed in the note to section 7: the waivers are effective only while BCAL complies with the conditions. If BCAL fails to satisfy a condition, the waiver for that specific provision ceases to operate. BCAL would then be required to comply with the underlying rule, and any non‑compliance would be a breach of the Capital Rules or Securities Markets Rules as applicable. Those underlying rules carry civil penalty provisions or administrative sanctions under the ASIC Act and the Corporations Act. For example, the Capital Rules impose obligations to maintain adequate capital resources, and a breach could lead to ASIC suspending or cancelling BCAL’s market participant status, seeking a civil penalty in the Federal Court, or issuing infringement notices.

The instrument also imposes time‑sensitive reporting duties with specific cut‑offs (e.g., by 9:00 pm Sydney time on each Business Day, or by the 21st day of each month). Missing these deadlines could constitute non‑compliance with the condition, thereby voiding the waiver for that period. Because the conditions are ongoing, any breach would not be a one‑off penalty but would potentially make BCAL retrospectively non‑compliant if the breach continues. There is no grace period or cure provision in the instrument; the usual administrative grace periods in the Capital Rules (if any) may not apply once the condition is broken.

The instrument does not prescribe specific fines or penalties for providing false or misleading information in the returns. However, the underlying laws apply. For example, section 1308 of the Corporations Act makes it an offence to make a false or misleading statement to ASIC in a document required to be lodged. Similarly, the ASIC Act contains provisions for false or misleading representations. The ad hoc returns and declarations required under section 7 would be documents “lodged with ASIC” for this purpose. Directors who authorise the Risk‑Based Return Declarations face personal liability.

Enforcement is likely to be triggered by ASIC’s routine surveillance of BCAL’s filings and the Limit monitoring. ASIC may compare BCAL’s returns with its SFC filings and its own capital calculations. If the Limit is exceeded and BCAL fails to react, ASIC would have grounds to treat the waiver as inoperative. Given the entity‑specific nature of this instrument, ASIC is likely to allocate compliance monitoring resources directly to BCAL, as any breach would be high‑profile.

This instrument is made under subrule 1.2.1(1) and rule 1.2.3 of both the Capital Rules and the Securities Markets Rules. Those enabling provisions grant ASIC the power to waive compliance with any provision of those rules, subject to conditions. The instrument sits as a subordinate legislative instrument that overrides specific primary rules, but only for BCAL and only for the duration of its operation. It does not amend the Capital Rules or Securities Markets Rules themselves; it merely creates an exception that is personal to BCAL.

The instrument interacts with the Corporations Act 2001 indirectly. The Capital Rules are made under section 798C of the Corporations Act, and compliance with them is a condition of market integrity. A breach of the Capital Rules (if the waiver is not invoked or is lost) can lead to ASIC enforcement action under the Corporations Act. The instrument does not affect BCAL’s obligations under the broader Corporations Act, such as licensing, financial reporting, or director duties. BCAL must still comply with all applicable provisions of the Corporations Act that are not specifically waived.

The instrument interacts with Hong Kong law through its conditions. BCAL must be licensed by the SFC for Type 1 regulated activity. Its statutory accounts must comply with Hong Kong accounting standards and the laws of Hong Kong. The Financial Resources Return it files with the SFC is accepted as part of its ASIC compliance package. This creates a dual regulatory reporting framework: BCAL provides to ASIC the same documents it already prepares for the SFC, plus some additional ASIC‑specific returns (such as the unaudited return in the form of an Annual Audited Risk‑Based Return). The instrument effectively coordinates the two regimes, reducing duplication but also introducing complexity if the SFC changes its requirements.

The instrument interacts with the ASIC Market Integrity Rules (Capital) 2021 and ASIC Market Integrity Rules (Securities Markets) 2017 as the primary overridden legislation. It carves out specific provisions but leaves all other provisions intact. BCAL remains subject to the full suite of rules except for those listed in section 5. For instance, BCAL must still comply with rule 9.2.1 (general capital adequacy), rule 9.2.5 (risk management systems), and all rules relating to market conduct, trading, and record keeping. The interaction with the definition of “Excluded Asset” is important: the Alternative FX Position Risk Calculation cannot be used for positions that are Excluded Assets or foreign exchange contracts hedging them. So for those positions, the standard FX Position Risk Calculation still applies, unless the instrument provides otherwise.

The instrument expires on 1 July 2030. After that, BCAL must comply fully with the Capital Rules and Securities Markets Rules without any waivers, unless a new instrument is made. This sunset provision interacts with the normal rulemaking process: ASIC will need to reassess the rationale before expiry.

The instrument was originally made on 14 June 2022 and registered as F2022L00761, with effect from 17 June 2022. The original expiry date was 1 July 2025. On 19 May 2025, the ASIC Market Integrity Rules (Capital, Securities Markets) Barclays Capital Asia Limited Waiver Amendment Instrument 2025/153 (F2025L00581) was registered and commenced on 20 May 2025. The sole substantive amendment was to section 8 (Expiry): the date was changed from “1 July 2025” to “1 July 2030”. This five‑year extension indicates that ASIC considered the operational need for the waiver to continue, or that BCAL continued to meet the conditions and market conditions had not changed sufficiently to warrant full compliance. The amendment instrument itself would have been subject to the same legislative framework, showing a pattern of periodic review.

The amendment history also reveals that section 2 (about the table of sections) was repealed by operation of section 48D of the Legislation Act 2003 (a standard housekeeping provision for legislative instruments that have a single operative provision). No other amendments have been made. The compilation notes confirm that the instrument is up to date as at 20 May 2025, with no uncommenced amendments. The instrument’s life is thus straightforward: one original instrument, one amending instrument extending the expiry, and no further changes. The endnotes show that the instrument was published on the Federal Register of Legislation with a compilation date of 20 May 2025.

There is no litigation history cited in the instrument or in the endnotes. The instrument is a legislative instrument, not a court order. As a waiver, it is unlikely to be directly challenged in litigation unless a third party (e.g., a competitor) sought judicial review of ASIC’s decision to grant the waiver under the ADJR Act or as a constitutional matter. However, no such proceedings are recorded in the instrument or publicly known as of the compilation date. There is no reference to any court case, tribunal decision, or inquiry that has interpreted or applied this specific waiver. That is not surprising given the narrow, entity‑specific nature of the instrument. If BCAL were to breach the conditions and ASIC took enforcement action, that could lead to litigation about the scope of the waiver, but no such case has yet occurred.

The absence of litigation does not mean the instrument is uncontroversial; it may reflect that BCAL has complied with the conditions and that ASIC has not needed to resort to enforcement against it. The market integrity rules themselves have been subject to litigation in other contexts (e.g., challenges to ASIC’s rulemaking powers), but this particular waiver has not been litigated. Practitioners should note that the instrument could be challenged via judicial review if ASIC is alleged to have exceeded its power under subrule 1.2.1(1) or rule 1.2.3. However, the relatively small impact and the fact that it is a concessional waiver likely reduce the incentive for a third party to bring proceedings.

Several features of this instrument could trap the unwary compliance officer, auditor, or director. First, the Limit is self‑designed by BCAL. The instrument says BCAL “must develop and maintain a Limit (taking into account the historical size of the margin calls received from relevant clearing houses and any available counterparty risk mitigation measures) designed to monitor its Liquid Capital and its Total Risk Requirement.” This is a substantive discretion. If BCAL sets the Limit too high, it will rarely be exceeded, but may mask emerging capital stress. If set too low, it triggers frequent calculations and reporting. The historical margin call size is a backward‑looking metric; a sudden spike in margin calls (e.g., due to market volatility) could make the Limit inadequate, and BCAL could be in breach without having exceeded the pre‑set Limit. The instrument does not require BCAL to recalibrate the Limit dynamically, only to “maintain” it. A rigid Limit could become stale.

Second, the Alternative FX Position Risk Calculation uses Hong Kong dollars as the base currency. This means BCAL’s risk numbers will not be directly comparable with those of other Australian market participants whose calculations are in Australian dollars. When BCAL submits returns to ASIC, the numbers may be in HKD or converted. The instrument does not specify the conversion methodology or the source of exchange rates. This creates a risk of inconsistent measurement. If BCAL hedges its FX exposure to Hong Kong dollars, the Alternative FX Position Risk Calculation could systematically understate risk relative to the Australian dollar baseline, potentially allowing BCAL to maintain lower capital than a comparable participant.

Third, the notification triggers in section 7(1)(c) and (e) use the ratio “Liquid Capital divided by its Total Risk Requirement” ≤ 1.4 and ≤ 1.2. Under the standard Capital Rules, the trigger for notification is typically based on Liquid Margin falling below a minimum dollar amount, not a ratio. The ratio approach means that if both Liquid Capital and Total Risk Requirement fall proportionally, the ratio might remain above 1.4 even though the absolute buffer has shrunk. This could delay the escalation of reporting. Conversely, if Total Risk Requirement rises sharply while Liquid Capital remains stable, the ratio falls, triggering reporting even if BCAL’s absolute capital is comfortable. The ratio is sensitive to changes in both numerator and denominator.

Fourth, the net assets condition in subsection 7(2) says: “for so long as its net assets are at any time equal to or fall below zero, by 9:00 pm on each Business Day, provide ASIC with an Ad Hoc Risk‑Based Return showing its financial position as at the close of business in Hong Kong on the prior Business Day.” Note that “net assets” is not defined in the instrument. Does it refer to net assets under Hong Kong accounting standards (equity) or under the Capital Rules (tangible net worth)? The Capital Rules define “Net Assets” for the purposes of some calculations, but the instrument does not cross‑reference that definition. This ambiguity could lead to different interpretations. If BCAL uses Hong Kong statutory accounts, net assets may include intangibles or goodwill that would be excluded under the Capital Rules. The condition might be triggered earlier or later depending on the definition adopted.

Fifth, the Ad Hoc Risk‑Based Return and Monthly Risk‑Based Return are not defined in the instrument; they are forms presumably published by ASIC under the Capital Rules. However, the instrument does not guarantee that those forms are compatible with the modified calculations BCAL is using. BCAL may need to adapt the forms to reflect the Alternative FX Position Risk Calculation and Hong Kong accounting standards, potentially requiring ASIC’s prior approval or risking rejection.

Sixth, the annual audited accounts condition (7(4)(a)) requires accounts that “give a true and fair view of the financial position and performance of BCAL’s business as at the end of the financial year” and are prepared under Hong Kong accounting standards. But the condition also requires an “unaudited return in substantially the same form as the Annual Audited Risk‑Based Return”. The term “substantially the same form” is vague. BCAL could face a dispute with ASIC over what “substantially” means. Additionally, the auditor’s report is only required for the statutory accounts, not for the unaudited return. There is no requirement for the unaudited return to be reviewed or compiled by an accountant, which could lead to errors.

Seventh, the group structure chart condition (7(4)(f)) requires disclosure of “any subsidiaries (including nominee companies of BCAL) and any related/associated companies of BCAL that are involved in activities related to BCAL acting as a Participant of a Market.” The term “related/associated companies” is broad and could capture entities that have only minor connections. BCAL must carefully draw the boundary to avoid over‑disclosure or under‑disclosure.

Eighth, the waiver in subsection 5(4) (rule 9.2.3) is replaced by monthly reporting under condition 7(3). However, the instrument does not state what happens if BCAL fails to deliver the monthly return by the 21st day. It simply says the condition must be complied with for the waiver to be effective. A late delivery, even by one day, could theoretically invalidate the waiver for that month, leaving BCAL in breach of rule 9.2.3. There is no grace period for public holidays, though the definition of Business Day excludes Hong Kong holidays for the timing of some returns but not for the monthly deadline. The monthly deadline is “no later than the 21st day of each calendar month” without reference to Business Days. If the 21st falls on a weekend or Hong Kong holiday, BCAL could still be expected to deliver the return, unless it can argue impossibility.

Compliance for BCAL under this instrument is a multi‑step operational process that must be integrated with its existing risk management and reporting systems. The first step is to establish and maintain the Limit. BCAL’s risk team must design a Limit that incorporates historical margin call data from relevant clearing houses and any counterparty risk mitigation measures (such as collateral arrangements, netting agreements, or credit support annexes). The Limit should be documented, approved by senior management, and reviewed periodically,at least annually or whenever there is a significant change in clearing house margin models or BCAL’s portfolio. The Limit should be calibrated such that it provides an early warning before Liquid Capital falls to within 1.4 times Total Risk Requirement. BCAL may want to set the Limit at a multiple of the historically observed peak margin calls plus a buffer.

Second, BCAL must calculate the Alternative FX Position Risk Calculation consistently for all positions denominated in currencies other than Hong Kong dollars, except Excluded Assets and hedging contracts for Excluded Assets. The methodology must be documented and applied consistently. BCAL should compare the results periodically with the standard FX Position Risk Calculation to understand the divergence and to assure ASIC that the alternative method is not materially understating risk. It is prudent to maintain an internal reconciliation.

Third, BCAL must monitor the Limit and the Liquid Capital/Total Risk Requirement ratio in real time or at least intra‑day. As soon as the Limit is breached, BCAL must immediately calculate Liquid Margin. If the ratio ≤ 1.4, BCAL must notify ASIC immediately (presumably by phone or email to the alert contact) and then within one Business Day provide an Ad Hoc Risk‑Based Return. If the ratio ≤ 1.2, BCAL must provide a daily Ad Hoc Risk‑Based Return by 9:00 pm Sydney time each Business Day. The daily return must be based on data as at the close of business in Hong Kong on the prior Business Day. This requires BCAL to have systems that finalise the Hong Kong close and produce the return within a few hours, taking into account the time zone difference (Sydney is typically 2‑3 hours ahead of Hong Kong). BCAL should pre‑prepare templates and calculation logic to minimise manual effort.

Fourth, BCAL must prepare and submit the Monthly Risk‑Based Return by the 21st day of each calendar month. The return must reflect the accounts and financial position on the last Business Day of the previous calendar month, prepared under Hong Kong accounting standards. The accompanying Risk‑Based Return Declaration must be authorised by a director. BCAL should schedule a monthly sign‑off meeting early in the month to allow time for preparation and review.

Fifth, within four months after the end of its financial year, BCAL must assemble a package of documents: (a) Hong Kong statutory accounts (with directors’ declaration and auditor’s report); (b) an unaudited return in the form of the Annual Audited Risk‑Based Return; (c) a Risk‑Based Return Declaration; (d) the annual Financial Resources Return and audit report filed with the SFC; (e) a Form 6 statement signed by a director; and (f) a group structure chart. BCAL should coordinate its annual audit cycle to ensure all documents are ready and consistent. The unaudited return must be “substantially in the same form” as the annual audited return; BCAL should map the Hong Kong statutory accounts to the standard ASIC return format, noting any differences. The group structure chart should show the full corporate chain from ultimate parent (Barclays PLC) down to BCAL and any subsidiaries or related companies involved in market activities.

Sixth, BCAL must maintain records proving compliance with the conditions, including documentation of the Limit design, the Alternative FX Position Risk Calculation methodology, and all returns and notifications. ASIC may audit these records. Given the entity‑specific nature, ASIC may conduct targeted reviews. BCAL should designate a responsible compliance officer who understands the interplay between Hong Kong and Australian regulatory requirements.

Seventh, BCAL must periodically reassess the applicability of the waiver. If BCAL ceases to be a Hong Kong‑incorporated company, loses its SFC Type 1 licence, ceases to be a Participant, or acts as a principal, the waivers no longer apply. BCAL must have contingency plans to revert to full compliance with the Capital Rules and Securities Markets Rules within a reasonable time.

Finally, BCAL should monitor the expiry date of 1 July 2030 and, if it wishes to continue for another period, engage with ASIC well in advance to seek a new waiver. Given the five‑year duration of the current waiver, a similar timeline for a replacement is likely. The earlier the process starts, the lower the risk of a gap in coverage.