Part 5A.1 Reporting requirements for Crossing Systems
5A.1.1 Reporting requirements for Crossing Systems—Crossing System Initial Report
(1) A Market Participant that operates, or proposes to operate, a Crossing System must lodge with ASIC a report (the Crossing System Initial Report) which describes:
(a) the date on which the Crossing System began operating, or will begin to operate, in this jurisdiction;
(b) access to the Crossing System, including the criteria for determining persons who are eligible to use the Crossing System;
(ba) if applicable, the information required by item 5, column 3, of the table in subrule 5A.2.1(2);
(c) how Orders are prioritised and matched, and transactions are executed, on the Crossing System;
(d) how the price for transactions on the Crossing System is determined;
(e) the fees, commissions, rebates or other charges paid by or to the Market Participant and users of the Crossing System;
(f) whether the Market Participant that operates the Crossing System deals as Principal with clients on the Crossing System and if so, the arrangements the Market Participant has in place for the management of conflicts of interest that may arise between the Market Participant and those clients;
(g) the name of the Market or Markets to which:
(i) transactions executed on the Crossing System are reported; and
(ii) Orders matched on the Crossing System are transmitted for execution;
(h) where more than one Market is named under paragraph (g), the circumstances in which each Market is used for the purposes set out in paragraph (g); and
(i) whether Orders on the Crossing System are purged at the end of the day or remain on the Crossing System until matching or execution on the Crossing System next resumes, and if the Orders are not purged, the period of time they remain on the Crossing System.
(2) The Market Participant must lodge a Crossing System Initial Report with ASIC no later than 20 business days before the day the Market Participant begins to operate the Crossing System.
5A.1.2 Reporting requirements for Crossing Systems—Crossing System Monthly Report
A Market Participant that operates a Crossing System during a calendar month must, if there have been any changes during that calendar month to the information last provided to ASIC in the Market Participant’s Crossing System Initial Report or Crossing System Monthly Report:
(a) prepare, within 20 business days of the end of the calendar month, a report (the Crossing System Monthly Report) setting out the changes to the information provided in the Market Participant’s Crossing System Initial Report or Crossing System Monthly Report last provided to ASIC; and
Part Part 5A - ASIC Market Integrity Rules (Securities Markets) 2017 - Crossing Systems | Zoe
(b) provide the Crossing System Monthly Report prepared under paragraph (a) to ASIC as soon as practicable after it has been prepared.
Part 5A.2 Disclosure requirements for Crossing Systems
5A.2.1 Disclosure requirements for Crossing Systems—Information on a website
(1) A Market Participant that operates a Crossing System must keep for a period of seven years and make available Publicly Available Crossing System Information in relation to that Crossing System:
(a) on a website that is publicly accessible; and
(b) free of charge.
(2) For the purposes of these Rules, Publicly Available Crossing System Information means the information set out in column 3 of the following table.
Item
Type of information
Publicly Available Crossing System Information
1
Operator
The code identifying the Crossing System.
2
Start Date
The date the Crossing System began to operate in this jurisdiction.
3
Products
The types of financial products traded on the Crossing System.
4
Access Criteria
The criteria used to determine eligibility to use the Crossing System.
5
Aggregation and other Crossing Systems
If Orders may be executed or matched in another Crossing System because they are transmitted by the Market Participant or by the Market Participant’s Crossing System:(a) to one or more other Crossing Systems or to a Market Participant that operates a Crossing System; or(b) to another person (an Aggregator) who further transmits the Orders to one or more other Crossing Systems or to a Market Participant that operates a Crossing System; orif Orders may be executed or matched in the Market Participant’s Crossing System with Orders received (whether directly, or via an Aggregator) from a Crossing System operated by another Market Participant, or from a Market Participant that operates a Crossing System:(c) the code identifying the other Crossing System;(d) the legal name of the Market Participant that operates the other Crossing System; and(e) for each Crossing System and Market Participant identified under paragraphs (c) and (d), whether Orders are transmitted to, or received from the other Crossing System or Market Participant (whether directly, or via an Aggregator), or both.
Note: An Aggregator may be, for example, another Market Participant that receives orders and operates an aggregation algorithm that transmits received orders to one or more other execution venues (licensed markets, or other Crossing Systems).
(3) A Market Participant must, within one business day of implementing changes to the operation of the Crossing System described in the Publicly Available Crossing System Information, update the website where the Publicly Available Crossing System Information is made available, to reflect those changes.
(4) A Market Participant must give ASIC a copy of:
(a) the Publicly Available Crossing System Information made available under subrule (1); and
(b) each update to the Publicly Available Crossing System Information made available under subrule (3),
within one business day of making that information available on the website under this Rule.
(5) ASIC may determine in writing a list of the Crossing System codes referred to in subrule (2).
Note: Instruments made under subrule (5) are available on the Federal Register of Legislation. The register may be accessed at www.legislation.gov.au.
5A.2.2 Disclosure requirements for Crossing Systems—Information for users
(1) A Market Participant that operates a Crossing System must:
(a) prior to accepting an Order from a client for the first time after the time at which a Market Participant must comply with this Rule, provide the client with a copy of the Publicly Available Crossing System Information or inform the client of the website address where that information is available; and
(b) for all clients who have been provided with a copy of the Publicly Available Crossing System Information or informed of the website address where that information is available under paragraph (a), inform those clients each time an update to the Publicly Available Crossing System Information is made available under subrule 5A.2.1(3), prior to accepting an Order from that client after the information has been updated.
(2) A Market Participant that operates a Crossing System must:
(a) prior to accepting an Order from a client for the first time; and
(b) prior to accepting an Order from a client after the Non-Public Crossing System Information has been updated under subrule (3),
provide that client with a document containing the Non-Public Crossing System Information in relation to that Crossing System.
(3) A Market Participant must, within one business day of implementing changes to the operation of the Crossing System described in the Non-Public Crossing System Information, update the Non-Public Crossing System Information to reflect those changes.
(4) A Market Participant must give ASIC a copy of:
(a) the Non-Public Crossing System Information provided under subrule (2), within one business day of first providing that information; and
(b) each update to the Non-Public Crossing System Information under subrule (3), within one business day of that update.
(5) For the purposes of these Rules, Non-Public Crossing System Information means the information set out in column 3 of the following table.
Item
Type of information
Non-Public Crossing System Information
1
User obligations
A description of the obligations imposed on users of the Crossing System by the operator of the Crossing System.
2
Order Types
A description of the order types available to those who have access to the Crossing System, including a description of the characteristics of each order type.
3
Operations
A description of the operation of the Crossing System, including but not limited to:(a) how Orders are managed, including how prices are determined and cancellations are managed;(b) details of any different treatment or arrangements for certain users or order types;(c) the level of anonymity given to Orders, including whether indications of interest are allowed;(d) the circumstances in which Orders of the Market Participant trading as Principal may interact with other Orders in the Crossing System, and the nature of those Principal Orders (for example, proprietary desk, facilitation, or market-maker);(e) whether Orders of related bodies corporate of the operator enter the system, and if so, how conflicts arising because Orders of related bodies corporate enter the Crossing System, are managed;(f) how any other conflicts of interest that may arise are managed; and(g) if there are liquidity providers or market makers whose Orders access the Crossing System, the commitments (if any) they may have and any benefits they receive.
4
Fees
The fees imposed for Orders to gain access to the Crossing System, or to be matched or executed in the Crossing System, and an indication whether those fees differ from (e.g. by being in addition to) the Market Participant’s standard fees.
5A.2.3 Notification of Crossing System outages
(1) If technical or other system issues materially affect the efficiency of or proper functioning of a Crossing System operated by a Market Participant, that Participant must provide the following information, in writing, to ASIC and all users with Orders in the Crossing System other than users who are retail clients:
(a) a description of the effect of the technical or other system issues;
(b) how the technical or other system issues are being managed by the Market Participant;
(c) any alternative arrangements for users’ Orders that have been put in place by the Market Participant while the technical or other systems issues persist; and
(d) when the technical or other system issues have been resolved,
as soon as practicable after the technical or other system issue arises, or the issue is resolved, as applicable.
Part 5A.3 Fair treatment, fairness and priority in dealing and opting out by users of Crossing Systems
5A.3.1 Fair treatment of all users of a Crossing System
(1) A Market Participant that operates a Crossing System must ensure that the Crossing System is operated by a common set of procedures that balance the interests of all users of the Crossing System and do not unfairly discriminate between users of the Crossing System.
(2) Subrule (1) does not prevent a Market Participant that operates a Crossing System from providing less favourable treatment for its own use of the Crossing System, or less favourable treatment for use of the Crossing System by its related bodies corporate.
5A.3.2 Fairness and priority in dealing
A Market Participant that operates a Crossing System must ensure that the Crossing System deals fairly and in due turn with:
(a) Clients’ Orders; and
(b) a Client Order and an Order of the Participant trading as Principal.
5A.3.3 Relevant factors
(1) In considering whether Rule 5A.3.2 has been complied with, the following factors are relevant:
(a) the Market Participant acts in accordance with its instructions;
(b) Orders that do not involve the exercise of discretion by the Market Participant in relation to the time or price or quantity of the Order are entered in the Crossing System in the sequence in which they are received, and otherwise as expeditiously as practicable;
(c) Orders of a client (which is not a Prescribed Person) that involve the exercise of discretion by the Market Participant in relation to the time or price or quantity of the Order are given preference, within the meaning of subrule (2), over the Market Participant’s Orders as Principal, unless the client otherwise consents;
(d) if the sequence of entry of Orders into the Crossing System is not clearly established by the time the Orders were received, and one of the Orders is for the Market Participant trading as Principal, the Market Participant gives preference to the Order of a client over the Market Participant’s Orders as Principal;
(e) if the Market Participant has acted in accordance with its procedures to ensure that a person initiating, transmitting or executing an Order who is aware of instructions of a client (which is not a Prescribed Person) to deal in the relevant financial products that have not been entered in the Crossing System does not use that information to the disadvantage of that client;
(f) the Market Participant buys or sells for a wholesale client;
(g) allocation of transactions executed on the Crossing System occurs fairly; and
(h) a Participant’s Orders as Principal are not knowingly interposed between Orders of its clients that would otherwise have Crossed.
(2) In paragraph (1)(c), a reference to a Market Participant giving preference to an Order of a client over the Participant’s Orders as Principal means that from the time of receipt of the Order until it is fully executed, the Market Participant does not enter into, as Principal, a transaction executed on the Crossing System for the same financial products on the same terms, having regard to subrule (3), unless:
(a) the financial products are allocated to the client in accordance with the client’s instructions; or
(b) the financial products are allocated to the client pursuant to an allocation policy previously disclosed to the client, to which the client consents, under which the Market Participant may buy or sell (and be allocated) the same financial products as Principal.
(3) For the purposes of subrule (2), a limit Order which cannot be executed owing to price differences is not on the same terms.
5A.3.4 Opting out of Crossing Systems
A Market Participant that operates a Crossing System must permit a client or other user of the Crossing System to opt out of having its Orders sent to the Participant’s Crossing System (including any other Crossing System that may be accessible through the Market Participant’s Crossing System), and the Market Participant must not impose on a user that opts out any additional operational or administrative requirements as a consequence of opting out of the Crossing System.
Part 5A.4 Crossing Systems—Monitoring and suspicious activity reporting
5A.4.1 Monitoring activities in a Crossing System
(1) A Market Participant that operates a Crossing System must:
(a) monitor use of its Crossing System for compliance with the obligations of users described in subrule 5A.2.2(5);
(b) monitor use of its Crossing System for compliance with the operating procedures of the Crossing System; and
(c) take action to ensure breaches identified by the Market Participant during the course of the monitoring undertaken under paragraphs (a) and (b) do not recur.
(2) A Market Participant must notify ASIC, in writing, of all significant breaches identified by the Participant during the course of monitoring undertaken under subrule (1) as soon as practicable after identification of the relevant breach.
(3) A Market Participant must keep records:
(a) that demonstrate the monitoring activities it undertakes under subrule (1); and
(b) of all breaches identified under subrule (1),
for a period of seven years.
5A.4.2 Crossing System suspicious activity reporting
(1) Subject to subrule (2), if a Market Participant that operates a Crossing System has reasonable grounds to suspect that:
(a) a person (the Insider) has placed an Order into or entered into a transaction on the Crossing System operated by the Participant in relation to a financial product while in possession of inside information (within the meaning of section 1042A of the Act), whether or not the Market Participant is aware of:
(i) the identity of the Insider; or
(ii) all of the details of the Order or transaction; or
(b) a transaction or an Order transmitted to or executed on the Crossing System operated by the Market Participant has or is likely to have the effect of:
(i) creating an artificial price for trading in financial products on a financial market operated in this jurisdiction;
(ii) maintaining at a level that is artificial (whether or not it was previously artificial) a price for trading in financial products on a financial market operated in this jurisdiction;
(iii) creating, or causing the creation of, a false or misleading appearance of active trading in financial products on a financial market operated in this jurisdiction; 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 financial market operated in this jurisdiction,
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 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.
5A.4.3 Confidentiality
A Market Participant who notifies ASIC under subrule 5A.4.2(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.
Part 5A.5 Crossing System Tick Sizes and system controls
5A.5.1 Crossing System operators to use standard Tick Sizes
(1) A Market Participant that operates a Crossing System must not accept, display or queue Orders in its Crossing System in Tick Sizes less than:
(a) $0.01 for an Equity Market Product able to be traded on more than one Market priced at equal to or greater than $2.00;
(b) $0.005 for an Equity Market Product able to be traded on more than one Market priced at equal to or greater than $0.10 and less than $2.00; and
(c) $0.001 for an Equity Market Product admitted to quotation on the ASX Market or admitted to quotation on the Chi-X Market under the operating rules of the Chi-X Market priced at less than $0.10.
(2) Subrule (1) does not apply to an Order that, if executed, would result in a Block Trade, Large Portfolio Trade or, in the context of Rule 6.2.3, a transaction at the Best Mid-Point.
5A.5.2 Crossing System—Efficiency and integrity controls
(1) Subject to subrule (3), a Market Participant that operates a Crossing System must at all times have appropriate automated filters designed to ensure the efficiency and integrity of the Crossing System.
(2) Subject to subrule (3), a Market Participant that operates a Crossing System must ensure it has controls that enable immediate:
(a) suspension of, limitation of, or prohibition on, the entry into any Crossing System operated by the Market Participant of Orders in a series of related Orders where the Market Participant has identified that Orders in the series have entered the Crossing System operated by the Market Participant and have interfered with or are likely to interfere with the efficiency or integrity of the Crossing System; and
(b) cancellation of Orders in a series that have already entered a Crossing System operated by the Market Participant where the entry of further Orders in the series has been suspended, limited or prohibited under paragraph (a).
(3) A Market Participant that is subject to Rule 5.6.1 and 5.6.3 of these Rules does not have to comply with this Rule.
Note: Rule 5.6.1 and 5.6.3 require Market Participants to have automated filters and controls.