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 a 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 subrule (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.
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:
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 paragraph (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) 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 subparagraph (1)(b)(iii), in considering the circumstances of the Order, the Market Participant must have regard to the following matters:
(a) 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.
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, 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 Phase, which are entered with intent to affect the opening price of any Futures Market Contract or Option Contract.
3.1.4 Orders to be transmitted as soon as received
(1) Subject to subrule (3), subrule 3.3.1(1) and paragraph 3.4.1(b), a Market Participant must transmit Orders to a Trading Platform as soon as they are received.
(2) Subrule (1) applies to Orders that can, in accordance with Client instructions, be immediately transmitted to a Trading Platform and include “limit” and “market” Orders.
(3) Exceptions to subrule (1) are:
(a) Orders that cannot be transmitted to a Trading Platform such as “market on close”, “stop loss” or “market if touched”;
(b) “at best” Orders, provided these Orders are transmitted to a 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.
3.1.5 Orders to be transmitted and executed in the sequence received
(1) Subject to subrule (2), subrule 3.3.1(1) and paragraph 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 a 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.
3.1.6 Aggregation of Orders
(1) Subject to subrule 3.3.1(1) and paragraph 3.4.1(d), a Market Participant must not aggregate Orders for entry into a Trading Platform unless permitted under subrules (2A) or (2B).
(2A) For the ASX 24 Market, the only types of Orders which, when received, may be aggregated for placement into the Trading Platform of the ASX 24 Market, are:
(a) all futures or options Orders received when the ASX 24 Market is neither open, nor in the Pre-Opening Phase;
(b) spread or custom market Orders received during the Pre-Opening Phase of the ASX 24 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).
(2B) For the FEX Market the only types of Orders which, when received, may be aggregated for placement into the Trading Platform of the FEX Market, are:
(a) all futures or options Orders received when the FEX Market is neither open, nor in the Pre-Opening Period;
(b) spread or custom market Orders received during the Pre-Opening Period of the FEX 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).
3.1.7 Disclosure
(1) Subject to paragraphs 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 subrule (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 a 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 of a Market, but not at a level that is visible to other Market Participants of that Market is disclosure of information which is not generally available, nor reasonably considered to be generally available.
(4) For the purposes of this Rule, 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.
3.1.8 Withholding Orders
(1) Subject to paragraphs 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 a Market.
3.1.9 Withdrawing Orders
A Market Participant must not withdraw Orders in whole or in part for the benefit of another person.
3.1.10 Pre-arrangement
Subject to paragraphs 3.3.1(1)(b) and 3.4.1(a), a Participant of a Market must not arrange the details of a potential trade between two or more parties unless Participants of the same Market have been made generally aware of all relevant details of the potential trade, or unless specifically permitted otherwise under these Rules.
3.1.11 Trading to the exclusion of others
A Participant of a Market must not execute or attempt to execute trades with the intent to exclude other Participants of the same Market or their Representatives.
3.1.12 Wash trades
(1) Subject to subrule (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) Subrule (1) does not prohibit:
(a) a transaction where both sides are taken by the same Market Participant where the ultimate Clients are different;
(b) a transaction where both sides are by the same entity but acting in different capacities; and
(c) 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 subrules (4), (5) and (6):
a Participant of the FEX Market must report to ASIC all breaches of subrule (1) occurring on the FEX Market; and
a Participant of the ASX 24 Market must report to ASIC all the following breaches of subrule (1) occurring on the ASX 24 Market:
(i) wash trades of 50 lots or more in volume;
(ii) a wash trade that is not or does not appear to be inadvertent; and
(iii) wash trades that do not relate to the following Market Contracts:
(A) 30 Day Interbank Cash Rate futures;
(B) 90 Day Bank Accepted Bills futures;
(C) 3 Year Commonwealth Treasury Bond futures;
(D) 10 Year Commonwealth Treasury Bond futures;
(E) SPI 200 Index futures; or
(iv) where a Market Participant’s Client with direct market access has executed a wash trade and the Client intended to cross the trade.
(4) Where a Participant of the ASX 24 Market breaches subrule (1) that Market Participant must maintain a wash trade register in respect of any wash trade executed under their mnemonic, recording details of breaches of subrule (1) that were not reported to ASIC under paragraph (3)(b).
(5) 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 paragraph (3)(b) on its wash trade register.
(6) 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.
(7) For the purposes of subrules (4), (5) and (6) a wash trade register is a register of the following information in relation to the wash trades referred to in subrules (4), (5) and (6):
(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.
3.1.13 Acting in accordance with Client instructions and Client’s best interests
(1) A Market Participant must:
act on behalf of a Client only in accordance with that Client’s instructions, unless to do so would be contrary to the Rules;
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 instructions where there is a conflict between the Client’s interests and the Market Participant’s interests.
(2) For the purposes of this Rule, 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.
3.1.14 Personal account trading
(1) A person must not initiate a trade on a 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 a Market Participant to trade, or instructions to trade, in the same or similar commodity.
(2) For the purpose of this Rule, 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; or
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; or
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); or
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:
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 spouse, parents, son, daughter, brother, sister, grandparents, grandchildren, aunts and uncles.
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 subrule (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 subrule (1).
(4) In this Rule:
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 Market Contract or Option Contract.
similar commodity includes, without limitation:
in the case of an interest rates based Contract, all other interest rate based Contracts and,
in the case of an SPI contract, individual share futures Contracts.
3.1.16 Trades to be allocated in sequence of Order receipt
(1) Subject to subrule (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 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:
volume weighted average method; or
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 paragraph (b); and
(d) the Market Participant has retained a record of the advice sent to the Client under paragraph (c) while the Client remains a Client of the Market Participant and for a period of five 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 paragraph (3)(b).
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 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.
Part 3.2 Strategy Trading
3.2.1 Strategy Trade records
(1) A Market Participant must maintain a record of all Strategy Trades, for a period of five years.
(2) Market Participants must allocate each leg of a Strategy Trade to the same account.
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 on a Market, the Market Participant may:
(a) withhold transmission of the instructions in order to solicit Orders from Clients and other Market Participants of that Market;
(b) disclose details of Clients’ instructions; and
(c) aggregate Orders received from Clients in satisfaction or part satisfaction of the originating Client Order.
(2) For the purposes of subrule (1), pre-negotiated business on a Market refers to Orders involving Contracts which have been:
(a) permitted to be pre-negotiated in the operating rules of the relevant Market; and
(b) are in numbers of Contracts greater than or equal to the number designated by the Operator of the relevant Market.
3.3.1A Entry of orders
(1) If counterparties have been solicited by a Market Participant pursuant to paragraph 3.3.1(1)(a), the Market Participant must:
(a) make an enquiry through the message facility of the Trading Platform of the relevant Market, for a market in that contract month or strategy;
(b) wait until the period of time prescribed in the operating rules or in the procedures of the relevant Market, has elapsed since the entry of the enquiry or, if no such time is prescribed, 30 seconds; and
(c) then immediately enter the Order on the Trading Platform of the relevant Market for execution.
(2) An enquiry under paragraph (1)(a) must:
(a) specify all information that is material to the pricing and trading of the orders to be executed;
(b) where applicable, include a description of the contract, class and series of the option(s) that will form the strategy;
(c) where applicable, include a description of the intended trade using common market terminology; and
(d) 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 Participant of a Market (first Market Participant) holds opposing Orders at a specific price, and a bid or offer is entered in the relevant Market by another Participant of that Market (other Market Participant) following the message sent under paragraph (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.
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.
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.
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 Participants of the same Market;
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.
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.
3.4.3 Unfilled Block Trade Orders
(1) Subject to subrule (2), where counterparties have been solicited under paragraph 3.4.1(a) amongst other Market Participants of the relevant Market 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 subrule (1) must not be entered into a Trading Platform unless a period of 60 seconds has elapsed from the entry of the originating Block Trade Order.
3.4.4 Client authorisation
(1) Before executing a Block Trade Order on behalf of a Client on a Market, a Participant of that Market must be authorised by the Client to do so either specifically or generally.
(2) The Market Participant must keep a record of the identity of the authoriser, and the date and time of the authorisation.
Part 3.5 Trading principles for Exchange For Physical transactions
3.5.1 Prohibitions
No Exchange For Physical transaction may be effected:
(a) where the parties to each side of the physical transaction are the same or are acting on behalf of the same person; or
(b) where both sides of the Futures Market Contract are taken out by the same Market Participant on its own account or are taken out on behalf of the same Client.
3.5.2 Evidence of physical transaction
(1) Subject to subrule (2) where either a Participant of a Market or its Client is a party to an Exchange For Physical transaction, the Participant must ensure that evidence of the physical transaction, as set out in the operating rules for the relevant Market, is obtained by the Participant.
(2) The requirements under subrule (1) can alternatively be met by undertaking the following procedures:
(a) retaining and maintaining an updated list of Representatives authorised to register Exchange For Physical transactions on behalf of the Participant;
(b) obtaining and retaining executed copies of a Client undertaking which contains undertakings from the Client including that the Client will provide to the Participant full details of the physical transaction (including documentary evidence) which attach to Exchange For Physical transactions effected by the Participant on behalf of the Client; and
(c) requesting appropriate physical evidence on an “as needs basis” from the Client if the Participant is required to demonstrate compliance with this Rule.
3.5.3 Client authorisation
(1) Before executing an Exchange For Physical Order on behalf of a Client, a Market Participant must be authorised by the Client to do so either specifically or generally.
(2) The Market Participant must keep a record of the identity of the authoriser, and the date and time of the authorisation.
Part 3.6 Suspicious activity reporting
3.6.1 Notification requirement
(1) Subject to subrule (2), if a Market Participant has reasonable grounds to suspect that:
(a) a person (the Insider) has placed an Order into or entered into a transaction on a Market in relation to a financial product while in possession of inside information (within the meaning of section 1042A of the Corporations Act), whether or not the Market Participant is aware of:
the identity of the Insider; or
(ii) all of the details of the order or transaction; or
(c) a transaction or an order transmitted to a Trading Platform of a Market has or is likely to have the effect of:
creating an artificial price for trading in financial products on a Market;
(ii) maintaining at a level that is artificial (whether or not it was previously artificial) a price for trading in financial products on a Market;
(iii) creating, or causing the creation of, a false or misleading appearance of active trading in financial products on a Market; or
(iv) creating, or causing the creation of, a false or misleading appearance with respect to the market for, or the price for trading in, financial products on a Market,
whether or not the Market Participant is aware of:
(v) the intention of any party to the transaction or order; or
(vi) all of the details of the transaction or order,
the Market Participant must, as soon as practicable, notify ASIC in writing of the details of the transaction or order (to the extent known to the Market Participant) and the reasons it suspects the matter set out in paragraphs (a) and, or, (b).
(2) A Market Participant is not required to notify ASIC under subrule (1) if the Market Participant has reported the information that would otherwise be required to be contained in the notification to ASIC under subrule (1) to the Australian Transaction Reports and Analysis Centre under section 41 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 or under section 16 of the Financial Transaction Reports Act 1988.
3.6.2 Confidentiality
A Participant who notifies ASIC under subrule 3.6.1(1) must not disclose that the notification was made, or the information contained in the notification, to any person other than:
(a) for the purposes of seeking legal advice; or
(b) as required by law.