Part 3.1 Clients trading in products for first time
3.1.1 Documents to be given to a client
Before accepting an order from a person to enter into a Market transaction, a Market Participant must give the person, in addition to all of the documents which the Market Participant is required to give the person in respect of the Market transaction under the Corporations Act, all of the documents the Market Participant is required to give the person in respect of the Market transaction under this Part.
3.1.2 Documents to be given to a client: Options, LEPOs and Warrants
(1) Subject to subrule (4), before a Market Participant accepts an Order from a person to enter into an Options Market Transaction on a Market, the Market Participant must give the person a copy of any current explanatory booklet in respect of Options Market Contracts published by the operator of that Market, together with any updates to that explanatory booklet published by that Market operator, if it is the first time an Order to enter into an Options Market Transaction on that Market is accepted from the person.
(2) Subject to subrule (4), before a Market Participant accepts an Order from a person to enter into an Options Market Transaction in respect of LEPOs, the Market Participant must give the person a copy of any current explanatory booklet in respect of LEPOs published by the operator of the relevant Market, together with any updates to that explanatory booklet published by that Market operator, if it is the first time an Order to enter into an Options Market Transaction in respect of LEPOs on that Market is accepted from the person.
(3) Subject to subrule (4), before a Market Participant accepts an Order from a person to purchase a Warrant on a Market, the Market Participant must give the person a copy of any current explanatory booklet in respect of Warrants published by the operator of the relevant Market, together with any updates to that explanatory booklet published by that Market operator, if it is the first time an Order in respect of Warrants is accepted from the person.
(4) A Market Participant is not required to comply with subrule (1), (2) or (3) if the person from whom the Order is accepted is a wholesale client, unless the person expressly requests it.
(5) For the avoidance of doubt, a Market Participant is not required to comply with subrule (3) if the person from whom the Order is accepted is entering into a Market transaction to sell Warrants.
3.1.3 Information to be given to a client: Execution arrangements
(1) Before accepting an Order from a person (the Client) to enter into a Market transaction, if a Market Participant does not have Trading Permission to execute that Market transaction on the relevant Market, the Market Participant must give the Client a document which clearly discloses the execution arrangements in place for the Market transaction including, without limitation:
the name, principal telephone number and principal business address of the Trading Participant which executes the Market transactions of the Market Participant; and
(b) the extent of any NGF coverage, or coverage under other Compensation Arrangements, of the Market transaction.
(2) A Market Participant is not required to comply with subrule (1) in relation to a Client where, at the time the obligation to comply with subrule (1) would arise, all of the following are satisfied:
the Market Participant has already given the Client a document that complies with subrule (1) with respect to execution arrangements the Market Participant has in place for executing the Client’s transactions on a Market;
(b) the Market Participant proposes to rely on the execution arrangements referred to in paragraph (a) for the purposes of executing the Client’s transactions on the Market referred to in subrule (1); and
(c) the Market Participant notifies the Client in writing of any material change to the execution arrangements referred to in paragraph (a), including, without limitation, any changes to the matters referred to in paragraph (1)(a) and (b).
3.1.4 Information to be given to a client: Clearing arrangements for Equity Securities, Loan Securities or Warrants
(1) Before accepting an Order from a person (the Client) to enter into a Market transaction for an Equity Security, Loan Security or Warrant, if a Market Participant:
is not a Clearing Participant, who is permitted under the Clearing Rules to clear the Cash Market Transaction; or
(b) is a Clearing Participant who is permitted under the Clearing Rules to clear that Cash Market Transaction, but has an arrangement with another Clearing Participant to clear that Cash Market Transaction, and such transaction is cleared under the arrangement,
the Market Participant must give the Client a document which clearly discloses the clearing arrangements in place for that transaction, including, without limitation, any information required by subrule (2).
(2) The written disclosure document referred to in subrule (1) must include:
the name, principal telephone number and principal business address of the Clearing Participant which clears the Market transactions of the Market Participant;
(b) if, under the clearing arrangements each or any of the following apply:
notwithstanding that the Market transaction may have been entered into on the Client’s behalf, the Clearing Participant carries the Clearing Obligations and any settlement obligations for all Market transactions of the Trading Participant, including those of the Client, and must settle as principal with the Clearing Facility or the relevant counter-party;
(ii) the Client owes obligations to the Clearing Participant in relation to the clearing and settlement of Cash Market Transactions;
(iii) the Clearing Participant has rights against the Client in the event that:
the Client fails to pay the amounts due in respect of Cash Market Transactions;
(B) the Client fails to fulfil its settlement obligations in respect of Cash Market Transactions,
statements to that effect.
(3) A Market Participant is not required to comply with subrule (1) in relation to a Client where, at the time the obligation to comply with subrule (1) would arise, all of the following are satisfied:
the Market Participant has already given the Client a document that complies with subrules (1) and (2) with respect to the clearing arrangements in place for the Client’s transactions on a Market;
(b) the Market Participant proposes to rely on the clearing arrangements disclosed in the document referred to in paragraph (a) for the purposes of clearing the Client’s transactions on the Market referred to in subrule (1); and
(c) the Market Participant notifies the Client in writing of any material change to the clearing arrangements referred to in paragraph (a), including, without limitation, any changes to the matters referred to in paragraphs (2)(a) and (b).
3.1.4A Information to be given to a client: Settlement arrangements
(1) Before accepting an order from a person (the Client) to enter into a Market transaction, if a Market Participant:
(a) is not a Settlement Participant who is permitted under Settlement Rules to settle the Market transaction; or
(b) is a Settlement Participant who is permitted under the Settlement Rules of the relevant Settlement Facility to settle that Market transaction, but has an arrangement with a Settlement Agent to settle that Market transaction, and such transaction is settled under the arrangement,
the Market Participant must give the Client a document which clearly discloses the settlement arrangements in place for that Market transaction, including, without limitation, any information required by subrule (2).
(2) The written disclosure document referred to in subrule (1) must include:
(a) the name, principal telephone number and principal business address of the Settlement Agent which settles the Market transactions of the Market Participant; and
(b) if, under the settlement arrangements each or any of the following apply:
(i) notwithstanding that the Market transaction may have been entered into on the Client’s behalf, the Market Participant carries the settlement obligations for all Market transactions of the Market Participant, including those of the Client, and must settle as principal with the relevant counter-party;
(ii) the Client owes obligations to the Market Participant in relation to the settlement of Market transactions;
(iii) the Market Participant has rights against the Client in the event that:
(A) the Client fails to pay the amounts due in respect of Market transactions; or
(B) the Client fails to fulfil its settlement obligations in respect of Market transactions,
statements to that effect.
(3) A Market Participant is not required to comply with subrule (1) in relation to a Client where, at the time the obligation to comply with subrule (1) would arise, all of the following are satisfied:
the Market Participant has already given the Client a document that complies with subrules (1) and (2) with respect to the settlement arrangements in place for the Client’s transactions on a Market;
(b) the Market Participant proposes to rely on the settlement arrangements disclosed in the document referred to in paragraph (a) for the purposes of settling the Client’s transactions on the Market referred to in subrule (1); and
(c) the Market Participant notifies the Client in writing of any material change to the settlement arrangements referred to in paragraph (a), including, without limitation, any changes to the matters referred to in paragraphs (2)(a) and (b).
3.1.7 Minimum terms of Client Agreement for Options Market Contracts
(1) Before entering into a Market transaction in respect of an Options Market Contract on a Market on behalf of a retail client (the Client), a Market Participant must enter into a written agreement with the Client under which:
the Client and the Market Participant agree on the instruments (the Relevant Derivatives Market Contracts) in which the Market Participant may deal on behalf of the Client;
(b) the Client acknowledges that the Client has received and read a copy of any current explanatory booklets published by the relevant Market operator in respect of the Relevant Derivatives Market Contracts;
(c) the Client acknowledges that the Client is acting:
as principal; or
(ii) as an intermediary on another’s behalf and are specifically authorised to transact the Relevant Derivatives Market Contracts by the terms of:
a licence held by the Client;
(B) a trust deed (if the Client is a trustee); or
(C) an agency contract;
(d) the Market Participant discloses, and the Client acknowledges:
that notwithstanding that the Market Participant may act in accordance with the instructions of, or for the benefit of, the Client, any contract arising from any order submitted to the Market, is entered into by the Market Participant as principal;
(ii) that the Market Participant may, in certain circumstances permitted under the operating rules for the relevant Market or the Corporations Act, take the opposite position in a transaction in the Relevant Derivatives Market Contracts, either acting for another person or on its Own Account;
(iii) if the Client will or may be required to pay to the Market Participant commissions, fees, taxes or charges in connection with dealings in the Relevant Derivatives Market Contracts for the Client:
the fact that the Client is required to pay such commissions, fees, taxes and charges; and
(B) the manner in which the Client will be notified of the rates of such commissions, fees, taxes and charges;
(iv) that the Market Participant may record telephone conversations between the Client and the Market Participant and if there is a dispute between the Client and the Market Participant, the Client has the right to listen to any recording of those conversations;
(v) if the Market Participant may refuse to enter into Market transactions for the Client, or limit the Market transactions it enters into for the Client, that the Market Participant will notify the Client of any refusal or limitation as soon as practicable;
(vi) that the Trading Participant is not required to act in accordance with the Client’s instructions, where to do so would constitute a breach of the operating rules of the relevant Market, the Clearing Rules or the Corporations Act; and
(vii) that each Options Market Contract registered with a Clearing Facility is subject to operating rules and any practices, directions, decisions and requirements of that Clearing Facility.
(2) A Market Participant must set out in a Client Agreement entered into under subrule (1) any minimum period of notice to terminate the agreement and any other limitations on the right to terminate the agreement.
3.1.8 Client Agreement for Warrants
(1) Before entering into a Market transaction to buy Warrants on behalf of a retail client (the Client), a Market Participant must enter into a written agreement with the Client under which the Market Participant discloses, and the Client acknowledges that they are aware that:
a Warrant has a limited life and cannot be traded after its expiry date;
(b) Warrants do not have standardised Terms of Issue and it is the responsibility of the Client to become aware of the Terms of Issue of any Warrant in which the Client chooses to invest; and
(c) Warrants may be subject to adjustments after their initial issue and it is the Client’s responsibility to become aware of any adjustments which may have been made to any Warrant in which the Client chooses to invest.
(2) The written agreement referred to in subrule (1) must include an acknowledgement from the Client that the Client has received and read a copy of any current explanatory booklet in respect of Warrants issued by the operator of the Market where the transaction will be entered into.
3.1.9 Client Agreement for Partly Paid Securities
Before entering into a Market transaction to buy Partly Paid Securities on behalf of a retail client (the Client), a Market Participant must enter into a written agreement with the Client under which the Market Participant discloses, and the Client acknowledges that they are aware, that:
a Partly Paid Security is a security which may require the Client to make a further payment or payments at some time in the future;
(b) it is the responsibility of the Client to obtain and read a copy of the prospectus, product disclosure statement or information memorandum issued by an Issuer which sets out the particular features of, and rights and obligations attaching to, a Partly Paid Security before the Client places an order to buy a Partly Paid Security;
(c) the Client may be required to make further payments on a Partly Paid Security and that a failure to make a further payment by the specified date(s) may result in an Issuer of a Partly Paid Security or their associates or agents taking action, including legal action, against the Client to recover the outstanding payments and/or may result in the forfeiture of the Client’s entitlement to the Partly Paid Security;
(d) in certain circumstances the Client may be required to make a further payment on a Partly Paid Security despite the fact that the Client may have disposed of a Partly Paid Security prior to the date that a further payment falls due;
(e) the Client should monitor announcements made by the Issuer of a Partly Paid Security and that it is the responsibility of the Client to inform themselves of the dates or circumstances that a further payment falls due and the last day that the Client can dispose of the Partly Paid Security before the Client becomes required to make a further payment; and
(f) the amount of a further payment may be unrelated to the financial performance of a Partly Paid Security and that the amount of the further payment may exceed the intrinsic value of a Partly Paid Security at the time a further payment falls due.
3.1.10 Other terms of Client Agreements
For the avoidance of doubt, a Client Agreement may include other disclosures, acknowledgements, terms and conditions agreed between a Market Participant and a Client, or required to be included under the operating rules of the Market to which the Client Agreement relates, provided they are not inconsistent with the requirements of Rules 3.1.7, 3.1.8 and 3.1.9.
3.1.11 Market Participant to keep copy of Client Agreement and disclosures
A Market Participant must retain a copy of each Client Agreement and any disclosures made under this Part for at least seven years following the date on which the Client Agreement, or the arrangement the subject of the disclosure, is terminated.
3.1.12 Client agreement where Market Participant is not the Clearing Participant (Options Market Transactions only)
Before entering into an Options Market Transaction on a Market for a person (the Client), where a Market Participant:
is not a Clearing Participant, who is permitted under the Clearing Rules to clear that Options Market Transaction; or
(b) is a Clearing Participant, who is permitted under the Clearing Rules to clear that Market transaction, but has an arrangement with another Clearing Participant to clear that Options Market Transaction, and such transaction is cleared under the arrangement,
the Market Participant must:
have previously confirmed with the Clearing Participant that the Client has entered into an agreement with the Clearing Participant as required under the Clearing Rules; or
(d) where the Client is a wholesale client, have satisfied itself that the Client has executed and lodged with the Clearing Facility a Wholesale Client Agreement as required under the operating rules of the relevant Market.
3.1.13 Client agreement where Market Participant is the Clearing Participant (Options Market Transactions only)
Before entering into an Options Market Transaction for a person (the Client) on a Market, where a Market Participant is the Clearing Participant in relation to the Options Market Transaction, the Market Participant must:
have entered into an agreement with the Client as required under the Clearing Rules; or
(b) where the client is a wholesale client, have satisfied itself that the Client has executed and lodged with the Clearing Facility a Wholesale Client Agreement as required under the operating rules of the relevant Market.
Part 3.2 Trading as Principal
3.2.1 Application
This Part 3.2 applies where a Market Participant enters into a Market transaction with a Client as Principal, except where the Client is a Market Participant of that Market or a participant or member of a stock exchange that:
is a Recognised Stock Exchange within the meaning of the operating rules of that Market;
is a Recognised Overseas Exchange within the meaning of the operating rules of that Market; or
(c) is a Recognised Stock Exchange within the meaning of the operating rules of another Market.
3.2.2 Disclosure and consent
Before entering into a Market transaction as Principal with a person (the Client), a Market Participant must disclose, or have previously disclosed, in accordance with paragraph 991E(1)(c) of the Corporations Act, that it is acting, or may act, as Principal and have obtained the consent of the Client, in accordance with paragraph 991E(1)(d) of the Corporations Act.
3.2.3 Confirmation must include disclosure
When a Market Participant enters into a Market transaction with a person (the Client) as Principal, the confirmation issued by the Market Participant to the Client under Rule 3.4.1 in respect of that Market transaction must state that the Market Participant entered into the transaction as Principal and not as agent.
3.2.4 Brokerage and commission
(1) When a Market Participant enters into a Market transaction as Principal with a person (the Client), the Market Participant must not charge the Client brokerage, commission or any other fee in respect of the Market transaction, except in the following circumstances:
where the Client is a Prescribed Person of the Market Participant;
(b) where the Client is a wholesale client who has consented to the Market Participant charging brokerage, commission or the other fee (and that consent has not been withdrawn); or
(c) where otherwise permitted by the Corporations Act.
(2) A Market Participant must keep a written record of any consent given by a wholesale client under paragraph (1)(b), and send a copy of the record to that wholesale client as soon as practicable.
3.2.6 Register of persons who are regarded as Principal
A Market Participant must keep a register of the persons referred to in paragraphs (a) to (f) of the definition of “Principal” in Rule 1.4.3.
Part 3.3 Client instructions
3.3.1 Market Participant restrictions
A Market Participant must not:
accept or execute instructions from a person (a Client) to enter into a Market transaction except in accordance with these Rules and the operating rules of the relevant Market;
(b) enter into a Market transaction for a Client, except in accordance with the instructions of the Client, or of a person authorised in writing by a Client to give such instructions, or pursuant to an exercise of discretion in respect of that particular Client’s Managed Discretionary Account or as otherwise permitted by these Rules or the operating rules of the relevant Market;
(c) allocate a Market transaction to a Client’s account unless the Market transaction was entered into on the instructions of the Client, or of a person authorised in writing by a Client to give such instructions, or pursuant to an exercise of discretion in respect of that particular Client’s Managed Discretionary Account or as otherwise permitted by these Rules or the operating rules of the relevant Market; or
(d) except as permitted under these Rules or the operating rules of the relevant Market, or in writing by ASIC, enter into or arrange a Market transaction on the instructions of a Client unless the instructions are executed in such a manner that the Market transaction is entered into on a Trading Platform.
3.3.2 Excessive trading
A Market Participant must not enter into Market transactions on a Managed Discretionary Account for a retail client where the size or frequency of the Market transactions may be considered excessive having regard to the investment objectives, financial situation and needs of the client and the relevant markets.
Part 3.4 Reporting to Clients
3.4.1 Confirmations—Form and timing
(1) Subject to Rule 3.4.3, a Market Participant must give a confirmation to a person (the Client) in respect of each Market transaction entered into on the Client’s instructions or on the Client’s Managed Discretionary Account.
(2) A Market Participant must send to, or cause to be sent to, the Client a confirmation:
in writing;
(b) electronically; or
(c) in another form permitted by ASIC,
as soon as practicable after the Market Participant enters into a Market transaction referred to in subrule (1).
(3) A confirmation given under subrule (1) must meet the following requirements:
the confirmation must include all of the information required to be included in a confirmation under Division 3 of Part 7.9 of the Corporations Act;
(b) the confirmation must include a statement that the confirmation is issued subject to:
the directions, decisions and requirements of the operator of the relevant Market, these Rules, the operating rules of the relevant Market, and, where relevant, the Clearing Rules of the relevant Clearing Facility and the Settlement Rules of the relevant Settlement Facility;
(ii) the customs and usages of the relevant Market; and
(iii) the correction of errors and omissions,
unless the Market Participant has obtained and retained an acknowledgment from the Client that the conditions set out in subparagraphs (i), (ii) and (iii) apply to the issue of confirmations to that Client;
(c) if the Market transaction is to be cleared or settled by another party which is a Clearing Participant or Settlement Agent, the confirmation must include the name of the Market Participant which executed the trade, where relevant, the Clearing Participant which clears it and where relevant, the Settlement Agent which settles it;
(d) the confirmation must state the time by which all documents and information which the Market Participant or Clearing Participant or where relevant, the Settlement Agent will require to settle the Market transaction must be provided by the Client:
in the case of a sale of Cash Market Products, the date by which the Client must provide all documents and security holder information (including, if applicable, the relevant holder identification number or personal identification number and/or shareholder reference number) required by the Relevant Clearing Participant to meet its Clearing Obligations and where relevant the Relevant Settlement Participant to meet its Settlement Obligations; and
(ii) if applicable, the date by which the Client must provide the consideration specified in the confirmation; and
(iii) if applicable, the date by which the net consideration to the Client falls due;
(e) the confirmation must state the amount of money which the Client must pay, or which the Client will receive, on settlement of the Market transaction and, if the Client is required to pay an amount of money, the time by which that money must be paid;
(f) where the Market transaction involved a Crossing, the confirmation must include a statement to that effect;
(g) the confirmation must include any disclosure required under Rule 3.2.3; and
(h) if the confirmation is a confirmation in respect of:
a Conditional Sale of a Cash Market Product and the corresponding confirmation in respect of the conditional purchase of the relevant Cash Market Product; or
(ii) the entry into of an Options Market Contract over a Cash Market Product which is, at the time, traded on a conditional basis,
the confirmation must be endorsed as conditional and state the condition and the effect of non-fulfilment of the condition.
3.4.2 Confirmations—Accumulation and price averaging
If a Market Participant is required by Rule 3.4.1 to give a confirmation to a person (the Client) and the Market Participant enters into multiple Market transactions for the purpose of completing the Client’s order, the Market Participant may accumulate those Market transactions on a single confirmation and specify the volume weighted average price for those Market transactions provided that:
the Client authorised in writing the accumulation and price averaging of two or more Market transactions in a confirmation at or before the time the order was placed; and
(b) if requested by the Client, the Market Participant gives to the Client a statement of all the individual prices of the Cash Market Products or Derivatives Market Contracts, as applicable, which are accumulated and averaged under this Rule.
3.4.3 Confirmations—Clients other than retail clients
(1) A Market Participant is not required to comply with Rule 3.4.1 in respect of a client that is not a retail client, provided the Market Participant:
has notified the client before entering a Trading Message on the client’s behalf that Market transactions effected for the client are subject to:
(i) the directions, decisions and requirements of the relevant Market operator, these Rules, the operating rules of the relevant Market, the Clearing Rules and where relevant, the Settlement Rules;
(ii) the customs and usages of the relevant Market; and
(iii) the correction of errors and omissions; and
(b) subject to subrule (2), notifies the client as soon as practicable:
(i) if the Market Participant entered into the client’s Market transaction as Principal; that the Market Participant entered into the Market transaction as Principal; and
(ii) if the client’s Market transaction was executed as a Crossing, the execution code of the execution venue for the Crossing.
(2) A Market Participant does not have to give the notifications in paragraph (1)(b) to a client if:
(a) the client has agreed not to receive such notifications; or
(b) the Market transaction is in respect of a financial product which is a Derivatives Market Contract.
(3) A Market Participant must keep a record of the notification referred to in paragraph (1)(a).
(4) ASIC may determine in writing the execution venue codes referred to in subparagraph (1)(b)(ii).
Note: Instruments made under subrule (4) are available on the Federal Register of Legislation. The register may be accessed at www.legislation.gov.au.
Part 3.4A Multiple Markets—Single trade confirmations
3.4A.1 Multiple Markets—Participant may produce single trade confirmation
If a Market Participant is required to give a confirmation to a client in accordance with section 1017F of the Corporations Act and Rule 3.4.1 (the Confirmation) and enters into a transaction on more than one Market for the purpose of completing a Client Order, the Participant may accumulate the transactions entered into on all Markets which complete the Client Order, on a single Confirmation and specify the volume weighted average price, rather than the price per unit, for all those transactions provided that:
(a) the client authorised in writing the accumulation and price averaging of two or more transactions in a Confirmation at or before the time the Order was placed; and
(b) if requested by the client, the Participant gives to the client a statement of all the individual prices of the relevant products, which are accumulated and averaged in the Confirmation.
Part 3.5 Client Money and Property
3.5.1 Trust accounts—Cash Market Transactions and Options Market Transactions
A Market Participant must establish one or more clients’ trust accounts for money received by the Market Participant in connection with dealings in Cash Market Transactions or Options Market Transactions.
3.5.2 Segregated accounts or trust accounts—Futures Market Transactions
A Market Participant must establish either one or more clients’ trust accounts or clients’ segregated accounts for money received by the Market Participant in connection with dealings in:
Futures Market Transactions; and
Options Market Transactions over an Underlying Financial Product which is a Futures Market Contract.
3.5.3 Bank accounts to be with Australian ADI
All money received by a Market Participant which the Corporations Act requires the Market Participant to deposit in a clients’ segregated account or in a clients’ trust account must be deposited in an account with an Australian ADI in Australia (which has been rated by an Approved Ratings Agency as being at least short term investment grade) unless:
the money is received by the Market Participant in another country and the Market Participant deposits the money in a clients’ segregated account or clients’ trust account with a branch of an Australian ADI with such a rating in that country; or
(b) Rule 3.5.4 applies.
3.5.4 Approved foreign banks
(1) ASIC may approve, in writing, a foreign bank at which a Market Participant may:
open clients’ segregated accounts or clients’ trust accounts for the handling of money received for a person in another country or for a person who is resident in another country; and
(b) invest money held in clients’ segregated accounts or clients’ trust accounts in another country.
(2) ASIC may impose conditions on the use of a foreign bank approved under subrule (1) for clients’ segregated accounts and clients’ trust accounts.
3.5.5 Change of rating or approval of ADI
If a Market Participant has a clients’ segregated account or a clients’ trust account with an Australian ADI which ceases to have the rating referred to in Rule 3.5.3 or with a foreign bank which ceases to be a bank approved under Rule 3.5.4, the Market Participant must transfer the balance of the relevant account to an entity which meets the requirements of Rule 3.5.3 or Rule 3.5.4, as applicable.
If a Market Participant invests money from a clients’ segregated account maintained under Rule 3.5.2 pursuant to paragraph 981C(a) of the Corporations Act, that investment must be readily realisable and at least 50% of money invested under that paragraph must be invested on 24 hour call terms.
3.5.7 Top up requirement—Clients’ segregated accounts
(1) Subject to subrule (2), if a person (the Client) does not satisfy, either through payment or the provision of security, a request by the Market Participant to meet a call in relation to the close out, settlement or daily settlement of Open Contracts within 48 hours following the call for payment, the Market Participant must pay into the clients’ segregated account the lesser of:
the amount of the request; or
the amount which the Market Participant would be obliged under the operating rules of the relevant Market to request from the Client on the following day.
(2) Where the request by a Market Participant for payment or the provision of security relates to derivatives traded on a market operated by a person other than the operator of the relevant Market, the Market Participant must by the time required under the rules of that market, pay into the clients’ segregated account the lesser of:
the amount of the request; or
(b) the amount which the Market Participant would be obliged under the operating rules of the other market to request from the Client on the following day.
3.5.8 Reconciliation of clients’ segregated accounts
(1) A Market Participant must perform an accurate reconciliation, by 7.00 pm on the Trading Day after the Trading Day to which the reconciliation relates, of the aggregate balance held by it at the close of business on each Business Day in clients’ segregated accounts maintained pursuant to Rule 3.5.2 and the corresponding balance as recorded in the Market Participant’s accounting records.
(2) The reconciliation referred to in subrule (1) must set out:
the date to which the reconciliation relates;
(b) the dollar amounts of:
Total Futures Client Monies;
(ii) Associated/Related Company Monies;
(iii) Director/Employee Monies;
(iv) Total Third Party Client Monies,
for both the day of the reconciliation and the prior day;
(c) the dollar amounts of:
Clients’ Segregated Account at Bank;
(ii) Deposits with ASX Clear Client Account;
(iii) Deposits with ASX Clear (Futures) Client Account;
(iv) Deposits with ASX Clear Futures Clearing Participant;
(v) Deposits with ASX Clear (Futures) Participant;
(vi) Deposits with an ASX Market Participant;
(vii) Deposits with an ASX 24 Market Participant;
(viii) Deposits with an Overseas Broker;
(ix) funds invested in accordance with paragraph 981C(a) of the Corporations Act;
(x) Total Deposits,
for both the day of the reconciliation and the prior day;
(d) the dollar amount of the Variation for both the day of the reconciliation and the prior day;
(e) an explanation of the reason for a Variation, if the dollar amount of the Variation is more than, or less than, zero;
(f) where the movement in Total Futures Client Monies is greater than 20% from the prior day, an explanation of the reason.
(3) For the purposes of this Part:
Associated/Related Company Monies means the total amount of money received from:
any body corporate that is related to the Market Participant;
(b) any person who is associated with the Market Participant; and
(c) any body corporate in which the Market Participant has a controlling interest,
in respect of transactions in futures contracts dealt on any exchange.
Client means a person (including any director, officer, employee or associated or related company of the Market Participant) on behalf of whom the Market Participant deals, or from whom the Market Participant accepts instructions to deal, in futures contracts.
Clients’ Segregated Account at Bank means the Total Third Party Client Monies held in the clients’ segregated account relating to futures contracts traded on any exchange.
Deposits with ASX Clear Client Account means the total amount of third-party client funds, including margin amounts, lodged with ASX Clear in relation to transactions in futures contracts.
Deposits with ASX Clear Futures Clearing Participant means the total amount of third-party client funds paid to a Clearing Participant of ASX Clear in relation to transactions in futures contracts.
Deposits with ASX Clear (Futures) Client Account means the total amount of third-party client funds, including margin amounts, lodged with ASX Clear (Futures) in relation to transactions in futures contracts.
Deposits with ASX Clear (Futures) Participant means the total amount of third-party client funds paid to a Clearing Participant of ASX Clear (Futures) in relation to transactions in futures contracts.
Deposits with an ASX Market Participant means the total amount of third-party client funds paid to a Participant of the ASX Market.
Deposits with an ASX 24 Market Participant means the total amount of third-party client funds paid to a Participant of the ASX 24 Market in relation to transactions in futures contracts.
Deposits with an Overseas Broker means the total amount of third-party client funds lodged with an Overseas Broker in relation to transactions in futures contracts.
Director/Employee Monies means the total amount of money received from:
(a) any director, or officer, of the Market Participant; and
(b) any employee of the Market Participant;
in respect of transactions in futures contracts dealt on any exchange.
Total Deposits means the sum of subparagraphs (2)(c)(i) to (c)(ix).
Total Futures Client Monies means the total amount of money received from Clients in respect of transactions in futures contracts, including amounts relating to futures contracts traded on any exchange.
Total Third Party Client Monies means:
Total Futures Client Monies less (Associated/Related Company Monies plus Director/Employee Monies)
Variation means:
Total Third Party Client Monies less Total Deposits
(4) A reconciliation referred to in subrule (1) must contain a statement signed by a person with supervisory responsibility for the Market Participant or a person authorised in writing by that person, stating that the signatory believes, and has no reason not to believe, that the reconciliation is accurate in all respects.
3.5.9 Reconciliation of trust accounts
(1) A Market Participant must perform a reconciliation of:
the aggregate balance held by it at the close of business on each Business Day in clients’ trust accounts maintained pursuant to Rule 3.5.1 or 3.5.2 and the corresponding balance as recorded in the Market Participant’s accounting records; and
(b) the balance held by it at the close of business on the last Business Day of each week on trust for each person on whose behalf money is held in a trust account maintained pursuant to Rule 3.5.1 or 3.5.2 and the corresponding balance as recorded in the Market Participant’s accounting records,
that:
is accurate in all respects; and
(d) contains a statement signed by a person with supervisory responsibility for the Market Participant or a person authorised in writing by that person, stating that the signatory believes, and has no reason not to believe, that the reconciliation is accurate in all respects.
(2) A Market Participant must perform the reconciliation referred to in subrule (1) by 7.00 pm on the Trading Day after the Trading Day to which the reconciliation relates.
3.5.10 Obligation to notify ASIC in respect of reconciliation
A Market Participant must notify ASIC, in writing, within two Business Days if:
a reconciliation has not been performed in accordance with Rule 3.5.8;
(b) a reconciliation has not been performed in accordance with Rule 3.5.9;
(c) according to a reconciliation performed pursuant to Rule 3.5.8, Total Deposits is less than Total Third Party Client Monies; or
(d) according to a reconciliation performed pursuant to Rule 3.5.9, there is a deficiency of funds in its trust accounts (or, in respect of a reconciliation performed pursuant to paragraph 3.5.9(1)(b), a deficiency in respect of any particular person on whose behalf money is held in the trust account) or if it is unable to reconcile its trust accounts pursuant to Rule 3.5.9.
3.5.11 Schedule of trust amounts
A Market Participant must by no later than five Business Days after 31 March, 30 June, 30 September and 31 December in each year cause to be prepared a schedule as at the above dates showing the respective amounts held in each trust account maintained by the Market Participant on behalf of clients, together with the names of the particular client in respect of each amount.
Part 3.6 Prohibition of advice to Client
3.6.1 Definition used in this Part 3.6
For the purposes of this Part 3.6, Client includes a shareholder in a company which constitutes the Market Participant.
3.6.2 Market Participant possesses information that is not generally available
Where as a result of its relationship to a Client, a Market Participant is in possession of information that is not generally available in relation to a financial product and which would be likely to materially affect the price of that financial product if the information was generally available, that Market Participant must not give any advice to any other Client of a nature that would damage the interest of either of those Clients.
3.6.3 Information barriers in place
For the purposes of Rule 3.6.2, a Market Participant is not regarded as having possession of information that is not generally available in relation to a financial product where:
that Market Participant has in place arrangements whereby information known to persons included in one part of the business of the Market Participant is not available, directly or indirectly, to those involved in another part of the business of the Market Participant;
(b) it is accepted that in each of the parts of the business of the Market Participant so divided, decisions will be taken without reference to any interest which any other such part or any person in any other such part of the business of the Market Participant may have in the matter; and
(c) the person advising the Client is not in possession of that information.
3.6.4 Certain actions do not constitute giving advice
For the purposes of Rule 3.6.2, a Market Participant or an Employee or partner of a Market Participant advising a Client that the Market Participant is precluded from giving the Client advice will not be regarded as giving advice.
Part 3.7 Dealing in Cash Market Products
3.7.1 Disclosure of shortfall—Must disclose to Client
A Market Participant, an Employee or a director of a Market Participant or a company which is a partner of a Market Participant who or which will be required to acquire Cash Market Products as underwriter or sub-underwriter must not offer such Cash Market Products to clients unless:
they first inform the clients concerned of the closing date of the issue or offering of the Cash Market Products and the reasons for the acquisition; or
(b) the offer to the client is made more than 90 days from the closing date.
3.7.2 Expenses—Reimbursement for out-of-pocket expenses
Where a Trading Participant seeks out-of-pocket expenses involved in the purchase or sale of Cash Market Products, the Trading Participant must not cover that charge by an increase or reduction in the price of the Cash Market Products.
3.7.3 Nominee holdings—Restrictions on when an Equity Security can be recorded in the name of a nominee company
(1) A Market Participant must not cause the ownership of an Equity Security of which it is not the beneficial owner to be registered in its own name or in the name of its partners, directors or Employees.
(2) A Market Participant may only cause the ownership of an Equity Security referred to in subrule (1) to be registered in the name of a nominee company which:
unless otherwise agreed by ASIC, is incorporated in Australia with a name which contains the word “nominee”;
(b) has a constitution which precludes the nominee company from owning any Equity Security or other property except cash beneficially; and
(c) is a directly legally and beneficially wholly owned subsidiary of the Market Participant which is operated by the Market Participant unless the Market Participant is a Clearing Participant who appoints a Settlement Participant as its agent in accordance with the Clearing Rules.
Part 3.8 Best execution obligation
3.8.1AA Application of Part
(a) Participants of a Market on or through which offers to acquire or dispose of Equity Market Products are made or accepted;
3.8.1 Best execution obligation—Best outcome
(1) Subject to subrules (3) and (4), when handling and executing an Order for a client a Market Participant must take reasonable steps to obtain the best outcome for that client.
(2) For the purposes of subrule (1), when handling and executing an Order for:
(a) a retail client who has not given an instruction under subrule (3), the best outcome means the best Total Consideration; and
(b) a wholesale client who has not given an instruction under subrule (4), the best outcome may be price, costs, Total Consideration, speed, likelihood of execution or any other relevant outcome, or any combination of those outcomes.
(3) If a retail client provides a Market Participant with instructions (retail client’s Instructions) in relation to handling and executing that retail client’s Order that are inconsistent with the Participant obtaining the best Total Consideration under subrule (1) for the retail client and that are:
(b) in writing, or if provided to the Market Participant verbally, recorded by the Market Participant and retained by the Market Participant for a period of seven years; and
(c) specific to the Order, and not contained within the terms and conditions of a client agreement or any other standard form agreement provided by the Market Participant to the client,
the Market Participant must take reasonable steps to handle and execute the Order in a way which satisfies the retail client’s Instructions.
(4) If a wholesale client provides a Market Participant with instructions (Wholesale Client’s Instructions) that are inconsistent with the Market Participant obtaining the best outcome under subrule (1) for the wholesale client and that are:
(b) in writing, or if provided to the Market Participant verbally, recorded by the Market Participant and retained by the Market Participant for a period of seven years; and
(c) not contained within the standard terms and conditions of a client agreement provided by the Market Participant to the client, but which may be standing instructions or specific Order by Order instructions,
the Market Participant must take reasonable steps to handle and execute the Order or Orders in a way which satisfies the Wholesale Client’s Instructions.
(5) If a standing instruction is given to a Market Participant under paragraph (4)(c), that instruction must be:
(a) periodically reviewed to ensure it remains possible for the Market Participant to satisfactorily perform the instruction; and
(b) if the instruction provides that the Market Participant is not required to comply with subrule (1), only acted on by the Market Participant for a period of 12 months.
3.8.2 No inducement
(1) Subject to subrule (3), a Market Participant must not take steps to encourage or induce a client to provide the instructions referred to in subrules 3.8.1(3) or (4).
(2) A Market Participant must not take steps to encourage or induce a client to agree that the Participant is not required to disclose the matters referred to in subrules 3.10.1(1) and (2).
(3) A Market Participant who takes steps to inform a wholesale client that its standing instructions provided under paragraph 3.8.1(4)(c) are due to expire, does not contravene this Rule.
3.8.3 Prohibition on discriminatory commission structure
A Market Participant must not charge a client, or propose to charge a client, brokerage, commission or other fees for executing an Order on a Market that differs from the brokerage, commission or other fees the Participant would charge if the Order was executed on another Market, unless the difference is related to the actual cost of executing Orders on a Market.
Part 3.9 Policies and procedures
3.9.1AA Application of Part
(a) Participants of a Market on or through which offers to acquire or dispose of Equity Market Products are made or accepted;
3.9.1 Market Participant must have adequate policies and procedures in place
(1) A Market Participant must establish, document and implement adequate policies and procedures to ensure that it complies with Rule 3.8.1.
(2) A Market Participant’s policies and procedures under subrule (1) must, without limitation, set out a description of:
(a) the Order Books, and (in reliance on an exception to subrule 6.1.1(1)) any place other than an Order Book, to which the Market Participant may transmit Client Orders;
(b) how Client Orders will be handled and executed, including the circumstances in which Client Orders will be transmitted for matching or execution to an Order Book or elsewhere (in reliance on an exception to subrule 6.1.1(1)) and the circumstances in which that transmission will be automatic and the circumstances in which that transmission will be manual; and
(c) arrangements to monitor the policies, procedures and implementation required by subrule (1) to ensure they continue to be adequate to ensure compliance with subrule 3.8.1(1).
3.9.2 Participant must comply with its policies and procedures
A Market Participant must comply with the policies and procedures required under Rule 3.9.1.
3.9.3 Best execution arrangements—Review
A Market Participant must review the policies and procedures and implementation of them required by Rule 3.9.1 each time:
(a) there is a material change in circumstances that affects where the Market Participant may transmit Client Orders; and
(b) the results of monitoring undertaken under paragraph 3.9.1(2)(c) suggest the policies and procedures under subrule 3.9.1(1) are not adequate to ensure compliance with Rule 3.8.1,
for the purposes of ensuring the policies and procedures and implementation of them continue to be adequate to ensure compliance with subrule 3.8.1(1).
Part 3.10 Disclosure to clients of best execution obligation
3.10.1AA Application of Part
(a) Participants of a Market on or through which offers to acquire or dispose of Equity Market Products are made or accepted;
3.10.1 Disclosure of best execution obligation
(1) Before accepting a Client Order from a client for the first time, a Market Participant must disclose to the client:
(a) that the Market Participant is required to handle and execute Client Orders in accordance with Part 3.8;
(b) how, in general terms, the requirements of Part 3.8 may affect the handling and execution of the Client Orders;
(c) the Order Books, and (in reliance on an exception to subrule 6.1.1(1)) any place other than an Order Book, to which the Market Participant may transmit Client Orders;
(d) the circumstances in which Client Orders may be transmitted to each Order Book and (in reliance on an exception to subrule 6.1.1(1)) to places other than Order Books; and
(e) that where a client provides a Market Participant with instructions that are inconsistent with the Market Participant obtaining the best outcome for the client, the Market Participant must take reasonable steps to handle and execute the Order or Orders in a way which satisfies those instructions and, as a result, may not achieve the best outcome for the client.
(2) Each time there is a material change that affects any of the matters referred to in paragraph (1)(c) or (d), a Market Participant must disclose a summary of those changes to clients as soon as practicable after the change occurs.
(3) A Market Participant must disclose the matters referred to in paragraphs (1)(a) to (e) upon receipt of a request from a client, within a reasonable time of receiving the request.
(4) The disclosure required by subrules (1) and (2) must be in writing, and be retained by a Market Participant for a period of seven years.
(5) The disclosure required by subrule (1) must include the level of detail of information about a Market Participant’s handling and execution arrangements that a client would reasonably require to enable the client to make an informed decision about whether to instruct the Market Participant to handle and execute Orders on its behalf.
(6) A Market Participant is not required to disclose the matters referred to in subrule (1) and (2) to a wholesale client if the wholesale client and the Market Participant agree that disclosure is not required, and the terms of that agreement are:
(b) in writing and retained by the Market Participant for a period of seven years; and
(c) not part of a standard client agreement or any other standard form agreement provided by the Market Participant to all its wholesale clients or to a class of its wholesale clients.
Part 3.11 Evidencing execution performance
3.11.1AA Application of Part
(a) Participants of a Market on or through which offers to acquire or dispose of Equity Market Products are made or accepted;
3.11.1 Demonstrating execution performance and Order transmission by Participants—On request by a client
(1) Subject to Rule 3.11.2, a Market Participant must, if it receives a reasonable request from a client to do so, demonstrate to the client that the Client’s Orders have been executed in accordance with the Market Participant’s policies and procedures required under Part 3.9.
(2) A Market Participant must comply with subrule (1) within a reasonable time after receiving the request.
3.11.2 Demonstrating execution performance and Order transmission by Participants—Evidencing adequacy of arrangements
A Market Participant must keep, for a period of seven years, records which enable the Market Participant to demonstrate compliance with the policies and procedures required under Part 3.9 and client instructions.