Part Part 1 - ASIC Market Integrity Rules (FEX Market) 2013 - 4 Interpretation

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Part 1.4 Interpretation

1.4.1 References to time

In these Rules a reference to time is to the time in Sydney, Australia.

Note: There is no penalty for this Rule.

1.4.2 Words and expressions defined in the Corporations Act

Words and expressions defined in the Corporations Act will unless otherwise defined or specified in these Rules or the contrary intention appears, have the same meaning in these Rules.

Note: There is no penalty for this Rule.

1.4.3 Definitions

“Acquire” has the meaning given by section 9 of the Corporations Act.

“Approved Foreign Bank” has the meaning given by regulation 1.0.02 of the Corporations Regulations.

“Approved Securities” means those securities described as approved securities by the Market Operator under the Market Operating Rules.

“ASIC” means the Australian Securities and Investments Commission.

“ASIC Act” means the Australian Securities and Investments Commission Act 2001 (Cth).

“Australian Financial Services Licence” means a licence granted under section 913B of the Corporations Act.

“Block Trade” means any Trade which is executed via the Block Trade Facility.

“Block Trade Facility” means the facility provided by the Market Operator for Trading Contracts and referred to in the Market Operating Rules as the Block Trade Facility.

“Block Trade Order” means an Order in a Contract prescribed by the Market Operator which must be executed via the Block Trade Facility.

“Business Day” has the meaning given by section 9 of the Corporations Act.

“Call” means the demand for payment of a sum of money made upon a Client.

“Clearing Entity” means a person admitted as a participant under the Clearing Rules.

“Clearing Rules” means operating rules:

(a) as the term is defined in section 761A of the Corporations Act; and
(b) made by LCH.Clearnet.

“Client” means in relation to a Market Participant, any person, partnership or Corporation on behalf of whom the Market Participant enters, Acquires or Disposes of a Futures Contract or Option Contract, or on whose behalf the Market Participant proposes to enter, Acquire or Dispose of a Futures Contract or Option Contract or from whom the Market Participant accepts instructions to enter, Acquire or Dispose of Futures Contracts or Option Contracts.

“Client Account” means an account of a Client.

“Client Trade” means a Trade of a Market Participant held on behalf of a Client.

(a) Client to provide information In relation to the Client’s Trading on the Market, the Client will upon the Market Participant’s request, provide all information and documentation relevant to that Trading, to the Market Participant and the Market Participant is authorised by the Client to provide the information and documentation to ASIC. (b) Margins Unless the Market Participant is performing executing business only and the Client has an agreement in place with a Clearing Entity, or is otherwise exempted under these Rules, an acknowledgment by the Client that: the Market Participant may Call for payment of Margin such money or property (or Call for the lodgement of Approved Securities in lieu thereof) as the Market Participant, in its absolute discretion, feels is necessary to protect itself from the personal obligation incurred by Dealing in Contracts on behalf of the Client; should the Client fail to meet the Call (or lodge Approved Securities) then the Market Participant may (without prejudice to any other rights or powers under the agreement) and without creating an obligation to do so, Close Out, without notice, all or some of the Client’s Contracts; the time for payment of Margins is of the essence and if no other time is stipulated by the Market Participant prior to Calling a Margin then the Client is required to comply within twenty-four (24) hours; liability to pay the Initial Margin accrues at the time the Trade is executed regardless of when a Call is made; liability to pay Variation Margin accrues at the time the Margin comes into existence regardless of when a Call is made; and the Client is responsible to pay in cash any deficit owing to the Market Participant after closure and that if the Client defaults in payment of such deficit, the Market Participant may realise any securities held by the Market Participant and apply the proceeds against that deficiency. (c) Tape recordings An acknowledgment by the Client that the Client’s telephone conversations with the Market Participant can be recorded by the Market Participant. The Client is to be given the right to listen to any recording in the event of a dispute or anticipated dispute. (d) Right to refuse to Deal An acknowledgment by the Client that the Market Participant reserves the right to refuse to Deal on behalf of the Client in relation to any Dealings in Contracts (other than Closing Out existing Open Positions held in the Market Participant’s account on behalf of the Client) or limit the number of Open Positions held on behalf of the Client or both. The Market Participant will inform the Client of any refusal at or before the time of the Client placing the Order or as soon as possible thereafter. (e) Termination and Closing Out An acknowledgment that: without affecting any existing obligations or liabilities, either the Client or the Market Participant may terminate the agreement at any time by giving the other notice In Writing to that effect; and upon termination of the Client agreement that unless otherwise agreed In Writing the Market Participant will Close Out all the Client’s Futures Contracts and Close Out, abandon or exercise any Options not yet exercised.

(a) Client money All money received by the Market Participant from its Clients or by a person acting on behalf of the Client under these Rules or the Market Operating Rules must be deposited in an account maintained by the Market Participant and designated as a Clients’ segregated account. If the account is operated outside Australia and the law in force in the jurisdiction where it is maintained requires the account to be designated in a particular way, the Market Participant must designate the account in that way. Where omnibus accounts are operated by a Market Participant (e.g. on behalf of another broker), a House Account and Client Account are to be maintained separately at all levels in the chain to the clearing and settlement facility level. A Market Participant must not net off the Client Account against the House Account. (b) Type of money to be paid into an account Only the following monies are permitted to be paid into a Clients’ segregated account: all money received by the Market Participant from its Client or by a person acting on behalf of its Client; interest on the amount from time to time standing to the credit of the account; interest or other similar payments on an investment, and the proceeds of the realisation of an investment; and any other money as required by the Rules or Market Operating Rules or the law to be paid by the Market Participant into a Clients’ segregated account. (c) When money must be paid into an account The money must be paid into a Clients’ segregated account on the day it is received by the Market Participant, or on the next Business Day. (d) Permitted withdrawal Withdrawals from a Clients’ segregated account made in any of the following circumstances are permissible: paying Margins and the settling of Dealings; making a payment to, or in accordance with the written direction of, a person entitled to the money; defraying brokerage and other proper charges; paying to the Market Participant money to which the Market Participant is entitled, whether at law or under the Rules or Market Operating Rules; and making a payment that is otherwise authorised by law. (e) Payment to another Australian Financial Services licensee If payment referred to in Rule 2.2.6(e)(ii) is made by the Market Participant to the holder of an Australian Financial Services Licence, the Market Participant must ensure that Australian Financial Services licensee is notified, at the same time as the payment is made or as soon as practicable after, that the money: (A) has been withdrawn from an account of the Market Participant maintained for Rule 2.2.6; and (B) should be paid into an account of the Australian Financial Services licensee maintained for Rule 2.2.6. If the Australian Financial Services licensee who receives the payment in Rule 2.2.6(e)(i) is also a Market Participant, it must, not later than the day after it receives the payment, pay the money received into an account maintained by it for Rule 2.2.6. (f) Requirement to deposit additional monies in Clients’ segregated account Where five (5) clear Business Days (inclusive of the day of the Call) after a Call has been made on a Client for Initial Margin or Variation Margin in accordance with the Market Operating Rules, or such Call should have been made in accordance with the Market Operating Rules, the Call which was or should have been made has not been satisfied by payment of monies into a Clients’ segregated account or lodgement of Cover, then the Market Participant must pay into the Clients’ segregated account an amount of money not less than either: (A) the liability of the Client under such a Call; or (B) the amount which the Market Participant would be obliged to Call the Client on the day after five (5) clear Business Days (inclusive of the day of the Call) has elapsed, whichever is the lesser. Subject to Rule 2.2.6(f) such monies may only be withdrawn in accordance with Rule 2.2.6(d) and only after such monies have been received by the Market Participant. The Market Participant must pay into the Clients’ segregated account after five (5) clear Business Days, any amount (which has not been met by the Client), which arises as a result of debit balances of a Client resulting from realised losses or otherwise. (g) Prohibited agreements A Market Participant is prohibited from making any agreement with a Client that the Client’s money is not to be held or does not need to be held in a segregated account for the benefit of the Client. (h) Permissible investments Where a Market Participant invests money from a Clients’ segregated account, the following kinds of investments may be made: investment in any manner in which trustees are for the time being authorised by law to invest trust funds; investment on deposit with an eligible money market dealer; investment on deposit at interest with: (A) an Australian ADI; or (B) an Approved Foreign Bank; the acquisition of cash management trust interests; investment in a security issued or guaranteed by the Commonwealth or a State or Territory; investment on deposit with a licensed Clearing and Settlement Facility; or an investment in accordance with the specific direction of a Client. (i) Monies invested Where a Market Participant invests money from a Clients’ segregated account then: the Market Participant must, prior to investing any amount, obtain the Client’s written agreement to the following matters: (A) the making of the investment; (B) how earnings on the investment are to be dealt with; (C) how the realisation of the investment is to be dealt with; (D) how any losses made on the investment are to be dealt with; and (E) the fee (if any) that the Market Participant proposes to charge for the investment; and such investment must be readily realisable and no less than fifty per cent (50%) of monies invested must be on twenty-four (24) hour call. (j) Separation of Market Participants’ Trading liabilities from Clients’ Trading liabilities A Market Participant must not use a Clients’ segregated account to meet any Initial Margin or Variation Margin liabilities which relate to Trading by that Market Participant on its own behalf or on behalf of a related corporation. (k) Accounting records for withdrawals A Market Participant must at all times maintain such accounting records as accurately indicate each withdrawal from a Clients’ segregated account. (l) Definition of Client For the purposes of Rule 2.2.6, “Client” excludes a Related Body Corporate or a division of the Market Participant. (m) Property For the purposes of Rule 2.2.6(m), “property” includes credit facilities and securities. On the receipt of property, a Market Participant must: (A) deposit the property in safe custody on or before the next Business Day after the property is received or deposited; (B) create and maintain the following records: (I) date property received/deposited in safe custody; and (II) particulars of the property so deposited. A Market Participant must keep Client property segregated from the Market Participant’s own property and Market Participants must be able to liquidate Client property as soon as practicable when required. A Market Participant must not use property held in safe custody to satisfy a Market Participant’s debt.