(1) This Rule applies to a Market Participant (“Foreign Market Participant”) that:
(a) is a foreign entity; and
(b) does not hold an Australian Financial Services Licence.
(2) Before entering into a Market Transaction, a Foreign Market Participant must provide ASIC with a deed of the Foreign Market Participant for the benefit of and enforceable by ASIC and the other persons referred to in subsection 659B(1) of the Corporations Act, which deed provides that:
(a) the deed is irrevocable except with the prior written consent of ASIC;
(b) the Foreign Market Participant submits to the non-exclusive jurisdiction of the Australian courts in legal proceedings conducted by ASIC (including under section 50 of the ASIC Act) and, in relation to proceedings relating to a financial services law, by any person referred to in subsection 659B(1) of the Corporations Act and whether brought in the name of ASIC or the Crown or otherwise;
(c) the Foreign Market Participant covenants to comply with any order of an Australian court in respect of any matter relating to the activities or conduct of the Foreign Market Participant in relation to the 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:
(i) 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:
(i) the Foreign Market Participant must have at all times an agent who is:
(A) a natural person or a company;
(B) resident in this jurisdiction; and
(C) authorised to accept, on behalf of the Foreign Market Participant, service of process and notices; and
(ii) the Foreign Market Participant must notify ASIC of any change to:
(A) the agent; or
(B) the name and address of the agent (if the agent is a company, address means the address of the registered office of the company); and
(iii) service of process on the Foreign Market Participant in relation to legal proceedings conducted by ASIC (including under section 50 of the ASIC Act), and in relation to proceedings relating to a financial services law, by any person referred to in subsection 659B(1) of the Corporations Act and whether brought in the name of ASIC or the Crown or otherwise, can be effected by service on the agent;
(e) the deed applies notwithstanding that the Foreign Market Participant may have ceased to be a Market Participant; and
(f) such additional terms notified by ASIC to the Foreign Market Participant.
Maximum penalty: $1,000,000
Chapter 3: Trading principles
Part 3.1 Trading principles for Orders entered on the Trading Platform
3.1.1 Expressions of Interest
(1) A Market Participant must not enter an Order into the Trading Platform based on an Expression of Interest without first confirming with the Client that that Expression of Interest is a firm Order to buy or sell.
(2) For the purposes of Rule 3.1.1(1), in respect of a Market Participant which is a Corporation, a “Client” includes a Related Body Corporate or a division of the Market Participant—which is separate from the Market Participant’s futures division.
Maximum penalty: $100,000
3.1.2 False or misleading appearance
(1) A Market Participant must not offer to purchase or sell a Contract or deal in any Contract:
(a) as Principal:
(i) with the intention; or
(ii) if that offer to purchase or sell or dealing has the effect, or is likely to have the effect,
of creating a false or misleading appearance of active trading in any Contract or with respect to the market for, or the price of, any Contract; or
(b) on account of any other person where:
(i) the Market Participant intends to create;
(ii) the Market Participant is aware that the person intends to create; or
(iii) taking into account the circumstances of the Order, a Market Participant ought reasonably suspect that the person has placed the Order with the intention of creating, a false or misleading appearance of active trading in any Contract or with respect to the market for, or the price of, any Contract.
(2) For the purposes of Rule 3.1.2(1)(a), a reference to a Market Participant offering to purchase or sell a Contract or deal in any Contract as Principal includes a reference to offering to purchase, sell or deal in any Contract on its own behalf or on behalf of the following persons;
a partner of the Market Participant;
(b) a director of, company secretary of, or person who has a substantial holding in the Market Participant;
(c) the spouse of, non-adult children of, family company of, or family trust of a partner, director, company secretary, or person who has a substantial holding in the Market Participant;
(d) a body corporate in which the interests of one or more of the partners of the Market Participant singly or together constitute a controlling interest; and
(e) a related body corporate of the Market Participant.
(3) For the purposes of Rule 3.1.2(1)(b)(iii), in considering the circumstances of the Order, the Market Participant must have regard to the following matters:
whether the Order or execution of the Order would be inconsistent with the history of or recent trading in that Contract;
(b) whether the Order or execution of the Order would alter the market for, or the price of, the Contract;
(c) the time the Order is entered or any instructions concerning the time of entry of the Order;
(d) whether the person on whose behalf the Order is placed, or another person who the Market Participant knows to be a Related Party of that person, may have an interest in creating a false or misleading appearance of active trading in any Contract or with respect to the market for, or the price of, any Contract;
(e) whether the Order is accompanied by settlement, delivery or security arrangements which are unusual;
(f) where the Order appears to be part of a series of Orders, whether when put together with other Orders which appear to make up the series, the Order or the series is unusual having regard to the matters referred to in this subrule;
(g) whether there appears to be a legitimate commercial reason for that person placing the Order, unrelated to an intention to create a false or misleading appearance of active trading in or with respect to the market for, or price of, any Contract;
(h) whether the proposed transaction, bid or offer which is proposed will involve no change of beneficial ownership;
(i) the frequency with which Orders are placed by a person;
(j) the volume of Contracts the subject of each Order placed by a person; and
(k) the extent to which a person amends or cancels an instruction to purchase or sell a Contract relative to the number of transactions executed for that person.
Maximum penalty: $1,000,000
3.1.3 Entering Orders without an intent to Trade
(1) A Market Participant must not enter Orders where there does not exist an intent to Trade.
(2) For the purposes of this Rule 3.1.3, circumstances which indicate that there does not exist an intent to Trade include:
(a) Orders which are entered at price limits substantially higher or lower than the previous settlement price of the specific Contract, or alternatively, entered with unusually large volume levels; or
(b) placement, modification and cancellation of Orders during the Pre-Opening Period, which are entered with intent to affect the opening price of any Futures or Options Contract.
Maximum penalty: $1,000,000
3.1.4 Orders to be transmitted as soon as received
(1) Subject to Rules 3.1.4(3), 3.3.1(1) and 3.4.1(b), a Market Participant must transmit Orders to the Trading Platform as soon as they are received.
(2) Rule 3.1.4(1) applies to Orders that can, in accordance with Client instructions, be immediately transmitted to the Trading Platform and include “limit” and “market” Orders.
(3) Exceptions to Rule 3.1.4(1) are:
(a) Orders that cannot be transmitted to the Trading Platform such as “market on close”, “stop loss” or “market if touched”;
(b) “at best” Orders, provided these Orders are transmitted to the Trading Platform at such time as the Market Participant forms the view that the best price may be achieved; and
(c) Orders where Client instructions preclude immediate transmission unless those instructions would cause the Market Participant to breach these Rules.
Maximum penalty: $100,000
3.1.5 Orders to be transmitted and executed in the sequence received
(1) Subject to Rules 3.1.5(2), 3.3.1(1) and 3.4.1(b) a Market Participant must:
(a) transmit Orders in the sequence in which they are received;
(b) not leave an Order in the Trading Platform and then promote another Client Order to take the place of a cancelled Client Order;
(c) not promote an Order to take the place of a cancelled Client Order;
(d) reduce the volume of an aggregated Order by the amount remaining of a cancelled Order where a Client cancels an Order which was part of the aggregated Order; and
(e) not engage in broking or offering of a favourable queue position.
(2) Orders may be transmitted and executed outside of the sequence in which they are received where Orders are aggregated under Rule 3.1.6.
Maximum penalty: $1,000,000
3.1.6 Aggregation of Orders
(1) Subject to Rules 3.3.1(1) and 3.4.1(d), a Market Participant must not aggregate Orders for entry into the Trading Platform unless permitted under Rule 3.1.6(2).
(2) The only types of Orders which, when received, may be aggregated for placement into the Trading Platform, are:
(a) all futures or options Orders received when the Market is neither open, nor in the Pre-Opening Period;
(b) spread or custom market Orders received during the Pre-Opening Period of the Market;
(c) all futures or options Orders received and recorded at exactly the same time;
(d) Orders that, by definition, cannot be entered upon receipt, for example “market on open” or “market on close”; and
(e) Orders negotiated under Part 3.3 of these Rules (pre-negotiated business).
Maximum penalty: $1,000,000
3.1.7 Disclosure
(1) Subject to Rules 3.3.1(1)(b) and 3.4.1(c), a Market Participant must not disclose any information about Orders or Expressions of Interest unless where otherwise permitted or required under these Rules or the law or exempted under Rule 3.1.7(2).
(2) No Market Participant may disclose to another party information (including Expressions of Interest) which is not generally available, or should not reasonably be considered to be generally available, to Market Participants. Only details of Orders and Expressions of Interest that have been disclosed on the Trading Platform may be disclosed to Clients.
(3) The disclosure of information about a Client’s Order, where the Order has been entered into the Trading Platform, but not at a level that is visible to other Market Participants is disclosure of information which is not generally available, nor reasonably considered to be generally available.
(4) For the purposes of Rule 3.1.7, “Order” is an instruction to Deal or Trade on behalf of a Client or an intention to deal or Trade by a party dealing proprietary business.
Maximum penalty: $1,000,000
3.1.8 Withholding Orders
(1) Subject to Rules 3.3.1(1)(a) and 3.4.1(b), a Market Participant must not withhold an Order with an intent to obtain a counterparty or counterparties.
(2) A Market Participant must not withhold two or more Orders with the intent to avoid trading with the Market.
Maximum penalty: $1,000,000
3.1.9 Withdrawing Orders
A Market Participant must not withdraw Orders in whole or in part for the benefit of another person.
Maximum penalty: $100,000
3.1.10 Pre-arrangement
Subject to Rules 3.3.1(1)(b) and 3.4.1(a), a Market Participant must not arrange the details of a potential Trade between two or more parties unless Market Participants have been made generally aware of all relevant details of the potential Trade, or unless specifically permitted otherwise under these Rules.
Maximum penalty: $100,000
3.1.11 Trading to the exclusion of others
A Market Participant must not execute or attempt to execute Trades with the intent to exclude other Market Participants or their Representatives.
Maximum penalty: $100,000
3.1.12 Wash Trades
(1) Subject to Rule 3.1.12(2), a Market Participant must not allow Trades to occur such that both sides of the Trade are on behalf of the same account (a “wash Trade”).
(2) Rule 3.1.12(1) does not prohibit:
a transaction where both sides are taken by the same Market Participant where the ultimate Clients are different;
a transaction where both sides are by the same entity but acting in different capacities; and
a transaction where each side is for a different division of the same Market Participant entity which is Trading separately and for different purposes.
(3) Subject to Rules 3.1.12(4) and (5), a Market Participant must report to ASIC all breaches of Rule 3.1.12(1).
(4) A Market Participant is not required to report a wash Trade to ASIC where a Client with direct market access has inadvertently executed a wash Trade and the Market Participant has processes in place to review, and reviews in accordance with those processes, the actions of the Client to ensure the Trade was inadvertent and subsequently records the details required by Rule 3.1.12(6) on its wash trade register.
(5) Where an error results in a Market Participant allocating both sides of a Trade to its error account, the Market Participant is not required to report this as a wash Trade to ASIC but must record the Trade on its wash trade register.
(6) For the purposes of Rules 3.1.12 (4) and (5) a “wash trade register” is a register of the following information in relation to the wash trades referred to in Rules 3.1.12 (4) and (5):
(a) time and date of Trade execution;
(b) deal number and full Order details;
(c) an explanation as to why/how the Trade occurred;
(d) details of any subsequent action taken by the Market Participant; and
(e) details on whether the wash Trade was inadvertent or deliberate.
Maximum penalty: $100,000
3.1.13 Acting in accordance with Client instructions and Client’s best interests
(1) A Market Participant must:
(a) act on behalf of a Client only in accordance with that Client’s instructions, unless to do so would be contrary to the Rules; and
(b) not act in a manner which has, or is intended to have, a detrimental effect, on the Client’s best interests.
(1A) A Market Participant must give priority to the Client’s interests where there is a conflict between the Client’s interests and the Market Participant’s interests.
(2) For the purposes of Rule 3.1.13, a “Client” of a Market Participant which is a Corporation includes a Related Body Corporate or a division of the Market Participant which is separate from that Market Participant’s futures division.
Maximum penalty: $100,000
3.1.14 Personal account Trading
(1) A person must not initiate a Trade on any Market in any Contract for that person’s account where that person has or is likely to have knowledge or information about any Client Orders of any Market Participant to Trade, or instructions to Trade, in the same or similar commodity.
(2) For the purpose of this Rule 3.1.14, a person has Traded for that person’s account if that person Trades for any entity, person or account:
in which that person has a beneficial interest, including a Market Participant’s House Account in which the person has a financial interest;
in which that person might by exercise of some discretion have a beneficial interest, including a Market Participant’s House Account in which the person has, or may have, a financial interest;
over which that person exercises any control (other than an account of the Market Participant of which the person is a Director, partner or Employee where such control is exercised in that capacity);
which is a Corporation in whose shares that person has a “Relevant Interest” as that term is defined by the Corporations Act; or
which is that person’s relative or a relative’s account in which that person has a financial interest.
(3) For the purposes of this Rule 3.1.14:
a “Client” of a Market Participant which is a Corporation includes a Related Body Corporate or a division of the Market Participant which is separate from the Market Participant’s futures division;
“a person having a financial interest in an account” includes any benefit which that person may enjoy as the result of the operation of that account, or Trading under that account; and
a “relative” of a person refers to a spouse, parent, son, daughter, brother, sister, grandparent, grandchild, aunt or uncle.
Maximum penalty: $100,000
3.1.15 Dual Trading prohibition
(1) A Market Participant’s Representative must not initiate a Trade for any Market Participant’s House Account in a Contract, where that Representative is holding or is likely to hold the Market Participant’s Client Orders to Trade, or for any reason is likely to have knowledge or information of the Market Participant’s Client Orders to Trade, in the same or similar commodity unless permitted under Rule 3.1.15(3).
(2) Conflict management
A Market Participant must ensure that Employees initiating Trading for Client Orders cannot initiate Trades for the Market Participant’s House Account and that an Employee who initiates Trades for the Market Participant’s House Account will not be privy to information concerning Client Orders.
(3) A Market Participant which executes a Trade to cover an Error Trade is not in breach of Rule 3.1.15(1).
(4) In Rule 3.1.15:
“Client” includes a Related Body Corporate or a division of the Market Participant which is separate from that Market Participant’s futures division.
“House Account” means an account operated by a Market Participant for principal Dealing only. It excludes Dealings by the Market Participant on behalf of a Corporation related to the Market Participant or another division within that Market Participant’s Corporation which is separate from its futures division.
“initiate” means that the Employee originates an Order to Trade in a Futures or Options Contract.
“similar commodity” includes, without limitation:
in the case of an oil-based Contract, all other oil-based Contracts; and
in the case of a coal-based Contract, all other coal-based Contracts.
Maximum penalty: $1,000,000
3.1.16 Trades to be allocated in sequence of Order receipt
(1) Subject to Rule 3.1.16(3) a Market Participant and its Representative must allocate Trades to Clients in the sequence in which the Orders are received.
(2) For the purposes of this Rule 3.1.16 a “Client” of a Market Participant which is a Corporation includes a Related Body Corporate or a division of the Market Participant which is separate from that Market Participant’s futures division.
(3) A Market Participant may allocate out of sequence where:
(a) Orders are aggregated under Rule 3.1.6;
(b) the Market Participant uses either of the following pro-rata methods:
(i) volume weighted average method; or
(ii) percentage basis;
(c) the Market Participant has advised, In Writing, each Client whose Orders may be allocated out of sequence under this Rule, nominating the pro-rata method selected under Rule 3.1.16(3)(b); and
(d) the Market Participant has retained a record of the advice sent to the Client under Rule 3.1.16(3)(c) while the Client remains a Client of the Market Participant and for a period of five (5) years after that Client ceases to be a Client of the Market Participant.
(4) A Market Participant must notify ASIC In Writing prior to adopting or changing its policy of allocating Orders on one of the pro-rata methods set out in Rule 3.1.16(3)(b).
Maximum penalty: $100,000
3.1.17 Post-allocation prohibition
(1) A Market Participant must not offer and/or allocate Trades to a Client unless those Trades have been obtained under instructions previously obtained from that Client.
(2) For the purposes of this Rule 3.1.17 a “Client” of a Market Participant which is a Corporation includes a Related Body Corporate or a division of the Market Participant which is separate from that Market Participant’s futures division.
Maximum penalty: $1,000,000
Part 3.2 Strategy Trading
(1) A Market Participant must maintain a record of all Strategy Trades, for a period of five (5) years.
(2) Market Participants must allocate each leg of a Strategy Trade to the same account.
Maximum penalty: $100,000
Part 3.3 Pre-negotiated business orders
3.3.1 Pre-negotiated business
(1) Where a Market Participant receives an instruction from a Client which can be executed as pre-negotiated business, the Market Participant may:
withhold transmission of the instructions in order to solicit Orders from Clients and other Market Participants;
disclose details of Clients’ instructions; and
aggregate Orders received from Clients in satisfaction or part satisfaction of the originating Client Order.
(2) For the purposes of this Rule 3.3.1(1) “pre-negotiated business” refers to Orders involving Contracts which have been:
permitted to be pre-negotiated in the Market Operating Rules; and
are in numbers of Contracts greater than or equal to the number designated by the Market Operator.
Note: There is no penalty for this Rule.
3.3.1A Entry of orders
(1) If counterparties have been solicited by a Market Participant pursuant to Rule 3.3.1(1)(a), the Market Participant must:
make an enquiry through the message facility of the Trading Platform for a market in that contract month or strategy;
wait until the period of time prescribed by the Market Operator in the Market Operating Rules or in the procedures to the Market Operating Rules has elapsed since the entry of the enquiry or, if no such time is prescribed, 30 seconds; and
then immediately enter the Order on the Trading Platform for execution.
(2) An enquiry under Rule 3.3.1A(1)(a) must:
specify all information that is material to the pricing and trading of the orders to be executed;
where applicable, include a description of the contract, class and series of the option(s) that will form the strategy;
where applicable, include a description of the intended trade using common market terminology; and
if the trade involves a ratio of futures or options and/or a delta hedge, information that explicitly specifies the ratio, delta and the price basis for the hedge in the underlying commodity, as applicable.
(3) Where a Market Participant (“first Market Participant”) holds opposing Orders at a specific price, and a bid or offer is entered in the Market by another Market Participant (“other Market Participant”) following the message sent under Rule 3.3.2(1)(a) that is at the same or better price than the opposing Orders held by the first Market Participant, the first Market Participant must give priority to trading against the bid or offer entered by the other Market Participant.
Maximum penalty: $100,000
3.3.2 Client authorisation
Before entering a pre-negotiated business Order on behalf of a Client under Rule 3.3.1, a Market Participant must be authorised In Writing by the Client to do so either specifically or generally. The authorisation must state that the Client authorises Orders to be pre-negotiated on the Client’s behalf.
Maximum penalty: $100,000
3.3.3 Definition of Client
(1) For the purpose of this Part 3.3 in respect of any Market Participant that is a Corporation, a “Client” includes a Related Body Corporate or a division of the Market Participant which is separate from the Market Participant’s futures division.
(2) For the purposes of Trading out of a Trade allocated to a Market Participant that is an Error Trade, the Market Participant’s futures division is classified as a Client.
Note: There is no penalty for this Rule.
Part 3.4 Trading principles for Block Trades
3.4.1 Participant entitlements
Where a Market Participant receives a Block Trade Order from a Client, the Market Participant may:
solicit counterparties to the Block Trade Order amongst other Market Participants;
withhold transmission of the Block Trade Order in order to solicit those counterparties;
disclose those details of the Block Trade Order as authorised by the Clients; and
aggregate Orders where each Order is greater than or equal to the Minimum Volume Threshold for that Contract.
Note: There is no penalty for this Rule.
3.4.2 Prohibitions
(1) Market Participants must not aggregate separate Orders in order to meet Minimum Volume Thresholds.
(2) Market Participants must not use the Block Trade Facility to execute Roll Business.
Maximum penalty: $100,000
3.4.3 Unfilled Block Trade Orders
(1) Subject to Rule 3.4.3(2), where counterparties have been solicited under Rule 3.4.1(a) and the Block Trade Order remains unfilled, then the Block Trade Order may revert to an Order.
(2) The Orders solicited from counterparties referred to in Rule 3.4.3(1) must not be entered into the Trading Platform unless a period of 60 seconds has elapsed from the entry of the originating Block Trade Order.
Note: There is no penalty for this Rule.
3.4.4 Client authorisation
Before executing a Block Trade Order on behalf of a Client a Market Participant must be authorised In Writing by the Client to do so either specifically or generally and such authorisation must include an acknowledgment by the Client that:
the price quoted for the Block Trade Order may or may not be the prevailing market price;
the price at which the Block Trade is executed will not be used in establishing the price of a Contract when it is settled in accordance with the Market Operating Rules;
Block Trades shall have no impact on the Trading Platform market data; and
Block Trades will be separately reported to the Market.