guide to becoming an asx participant · brand only participants of asx are entitled use the...

A Guide to Becoming an ASX Participant for Offshore Applicants

____________________________________________________________________________________________________________________________________ August 2011 of 10

Guide to Becoming an ASX Participant

For Offshore Applicants

ASX: The Australian Exchange

Disclaimer of Liability

Information provided is for educational purposes and does not constitute financial product advice. You should obtain independent advice from an Australian financial services licensee before making any financial decisions. Although ASX Limited ABN 98 008 624 691 and its related bodies corporate (“ASX”) has made every effort to ensure the accuracy of the information as at the date of publication, ASX does not give any warranty or representation as to the accuracy, reliability or completeness of the information. To the extent permitted by law, ASX and its employees, officers and contractors shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided or omitted or from any one acting or refraining to act in reliance on this information.

© Copyright 2011 ASX Limited ABN 98 008 624 691. All rights reserved 2011.

ASX Registered Office, Australian Securities Exchange Exchange Centre, 20 Bridge Street, Sydney NSW 2000 Fax (02) 9227 0885 PO Box H224 Australia Square Sydney NSW 1215 ASX Customer Service 131 279 www.asx.com.au


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Introduction

The ASX Group (ASX) was created by the merger of the Australian Stock Exchange and the Sydney Futures Exchange in July 2006 and is today one of the world’s top-10 listed exchange groups measured by market capitalisation. ASX is a multi-asset class, vertically integrated exchange group. Its activities span primary and secondary market services, including the raising, allocation and hedging of capital flows, trading and price discovery (Australian Securities Exchange); central counterparty risk transfer (via subsidiaries of ASX Clearing Corporation); and securities settlement for both the equities and fixed income markets (via subsidiaries of ASX Settlement Corporation).

ASX operates two trading platforms, one for equity and related equity derivative products traded between the hours of 10:00am and 4:00pm (Australian Eastern Standard Time) on ASX Trade; and one for a suite of interest rate, equity index and commodity futures (and options on futures) contracts as well as Contracts for Difference (CFDs), traded on a globally distributed 24 hour platform called ASX Trade24. ASX offers a range of Participant membership categories that span its trading, clearing and settlement facilities. This guide is designed to help applicants located outside of Australia understand the options available to them and to identify whether Participation is a viable option for their business.

ASX Clear

ASX Clear (Futures)

ASX

ASX 24

ASX Settlement

ASX Austraclear


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Why Become a Participant? Becoming a Participant of the ASX Group entitles you to the following benefits; Benefit Details Partnership • Partner with the one of the most widely recognised (financial services) brands in Australia

• Be part of a unique group of financial service providers

• Partner with ASX in exclusively branded marketing opportunities

• Promotion via the “Find a Broker” referral service on the ASX website (1.4 million unique visitors per

month)

Brand Only Participants of ASX are entitled use the specifically designed Participant emblem

Confidence Only clients of ASX participants are:

• Afforded protection under the National Guarantee Fund and Fidelity Fund

• Subject to Regulation by the ASX under a clear set of rules

Access • Provision of electronic access to the Australian equity and derivative markets via dedicated gateways

and access to the ‘ASX Net’ network.


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Regulatory considerations

Currently, ASX has obtained permissions for the location of Trading Participants and/or infrastructure within the following jurisdictions only. Note: Clearing and/or Settlement Participants are not permitted offshore.

Conditions imposed on ASX by the local regulators dictate that ASX requires the applicants to establish the following and provide evidence with their application:

• Be registered as Foreign Company with the Australian Securities and Investment Commission (ASIC)

• Hold a valid Australian Financial Services Licence (AFSL) – or obtain exemption from ASIC • Satisfy additional Conditions Precedent to Admission – as defined by ASX in response to the

submission of an application (Operating Rule 1002)

1 Access the CFTC website (http://cftc.gov/international/foreignmarketsandproducts/foreignproducts.html) to determine if a no-action letter has been issued to allow the offer or sale of a foreign exchange-traded broad-based security index futures contract (or option thereon) in the United States of particular products. No-action relief has been granted re: ASX/S&P 50 Futures and ASX/S&P 200 Futures is permitted and some ASX 24 contracts. Note: relief must be obtained in respect of any other products to be offered in the US. 2 In 2007, the SEC granted No Action relief enabling eligible registered broker-dealers and large financial institutions in the United States to deal in ASX exchange traded options (ETOs). In particular, the relief enables ASX and ASX Participants to familiarise these institutional clients with a limited range of ETOs and ASX Participants to accept orders for ETOs from those clients. 3 ASX 24's recognition is restricted to its operation of a futures market and a market in respect of CFDs on equities listed on ASX, and CFDs on Indices for which approval has been granted under s42 of the Securities and Futures Act. ASX's recognition is restricted to its operation of a securities market. Note: both ASX and ASX 24 must obtain the approval of the authority to list/de-list or permit the trading of any futures contract; any right, option or derivative re: any debentures, stock or shares; any right under a CFD or any other contract the purpose of which is to secure a profit or avoid a loss by reference to fluctuations in: the value/price of any debenture, stock or shares; the value/price of any group of debenture stock or shares; or any index of any debenture, stock or shares. No approval for ASX Clear/ASX Settlement Participants.

Jurisdiction Regulator Participant Types Allowed Products USA Commodity Futures Trading

Commission (CFTC) ASX 24 SPI Futures/Options1

Commodity Futures1 Energy Futures1 Interest Rate Futures1

USA

Securities and Exchange Commission (SEC)

None – Clients Only Exchange Traded Options2 (ETOs)

ASX

Cash Equities Listed Managed Investments (LMIs) ETOs3 Warrants/ETFs3 ASX Futures3 Interest Rate Securities3

Singapore Monetary Authority of Singapore (MAS)

ASX 24

Contracts For Difference (CFDs)3 SPI Futures/Options3 Commodity Futures3 Energy Futures3 Interest Rate Futures3

ASX Cash Equities ETOs Warrants/ETFs LMIs ASX Futures Interest Rate Securities

Hong Kong

Securities and Futures Commission (SEC)

ASX 24

CFDs SPI Futures/Options Commodity Futures Energy Futures Interest Rate Futures

United Kingdom Financial Services Authority (FSA) ASX 24 CFDs SPI Futures/Options Commodity Futures Energy Futures Interest Rate Futures


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Participant requirements

Remote Participation is available as a Market /Trading Participant on the ASX Market (Equities) and the ASX 24 Market (Futures) only. The ASX currently has no permissions for Clearing/Settlement Participants to be located off-shore. The ASX Market consists of a Cash Market and a Derivatives Market. Applicants can apply to become either a Market Participant or Principal Trader on either or both of these markets. The ASX 24 Market (previously known as Sydney Futures Exchange) consists of the Futures market. It is important to note that Direct Market Access (DMA) is supported on the ASX 24 market via an existing ASX 24 Participant – however non-Participant DMA is not supported on the ASX market. Market/Trading Participants Once approved as a Market Participant of ASX with Cash Market and / or Derivatives Market permissions, or as a Trading Participant of ASX 24, you will have direct access to the relevant markets via a direct connection to the ASX/ASX 24 Trading platforms, and can begin providing execution services to your own organisation and your clients as permitted under your Australian Financial Services Licence (AFSL). You will have to appoint an Australian based clearer who may be a related entity to your organisation or a Third Party Clearer (who is an ASX General Clearing and ASX Settlement Participant) to clear on your behalf and ensure an executed copy of the agreement has been lodged with ASX Compliance prior to commencing trading. As a Non-Clearing Market/Trading Participant you will have certain capital requirements, as defined in the ASIC Market Integrity Rules. If you are intending to outsource your clearing to a third party provider then the rights and obligations of the ASX Market Participant as set out in the Clearing Agreement will determine the extent to which the ASX Market Participant must hold capital for trading activity on the ASX market. Note: Capital Requirements for Non-Clearing Trading Participants transferred to ASIC as of 1 August 2011. Principal Traders Once approved as a Principal Trader of ASX/ASX 24 with Cash, Derivatives and / or Futures Market permissions you will have direct access to the relevant markets via a direct connection to the ASX/ASX 24 Trading platforms. Principal Traders transact on their own account and can not provide execution services to clients. As a Principal Trader you have no capital requirements under the ASX/ASX 24 Operating Rules. Note: Capital Requirements for Trading Participants transferred to ASIC as of 1 August 2011. The applicant is advised to liaise with ASIC directly to ascertain any Australian Financial Services License obligations that its proposed operations may incur. Making Markets If either a Market Participant or Principal Trader wishes to make markets in either Warrants or Derivatives they should contact ASX Customer Management to discuss the contracting terms and conditions.


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Operational considerations

Connectivity to the ASX Trade or ASX Trade24 platforms is established during the application process via the ASX Market Access team. Both systems are accessed internationally via platform-specific gateways: ASX Trade Gateway (equities), and ASX Trade24 Gateways (futures). ASX Trade Gateways are located in Australia and connect to ASX Trade via ASX Net, a domestic high-speed point-to-point fibre network. ASX Trade24 Gateways can be located in Australia, Chicago, London, Singapore, or Hong Kong. Australian gateways connect to ASX Trade24 via ASX Net, and international gateways connect via the ASX Trade24 Network. ASX also offers a hosted solution for ASX Trade24 Gateways in Chicago. Low latency connections are offered for both platforms to Participants hosted in the ASX Australian Liquidity Centre in Sydney (see section below).

ASXData Centres

Participant Australian Site

e

f

Fdr

F

k

ef k

EF

Equities Gateway

Futures GatewayNetwork Equipment

ASX Trade

ASX 24

ASX NetOptical Fibre

k

k

Edr

E

InternationalParticipant Site

k f

ASX InternationalHub

ASX InternationalHub

ASX Trade24 POP

ASX Trade24 POP

Australia London / ChicagoSingapore / Hong Kong

International cables

Loca

l tel

co li

nks

to A

SX h

ub s

ites

Connectivity to ASX Trading Platforms – International Sites

Customer network connection to Australian ASX Net site


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ASX Australian Liquidity Centre (ALC) The ASX Australian Liquidity Centre (Co-Location Facility) for both the ASX Trade and ASX Trade24 platforms will be operational from November 2011. This purpose built, state-of the-art data centre in Gore Hill, 5 kilometres to the north of the Sydney Central Business District will host all ASX Liquidity – creating a single Financial Services community hub for Australia. Co-location hosting enables members of the wider ASX community to place their infrastructure (such as proprietary trading equipment) within the same physical data centre as the ASX and ASX 24 primary matching engines. This enables the lowest latency access to market data and trade execution on ASX and ASX 24 markets. The ALC will be operational from November 2011, and orders for cabinet space are currently being taken. Multi-Market Operator Environment In May 2011, the Australian government issued a Market Operator License to Chi-X Australia Pty Ltd (Chi-X), who are planning to launch an alternative securities exchange in the fourth quarter 2011. As a result, and in conjunction with the launch of the ALC, ASX has implemented an additional ASX Net service that will provide the lowest-latency connection between the ALC and Chi-X who are hosted in the Equinix data centre. The new service will enable ALC customers to connect their equipment in their ALC cabinets to Chi-X over a 1Gbps, dual-link/redundant connection. ALC will also support an ASX Net service to the Chi-X back-up data centre at Global Switch. ASX Best

ASX Best® is the ASX smart order routing service enabling ASX participants to route orders to ASX for the execution within the expanded ASX trade execution offering or, to other market operators. All ASX Participants will be required to support smart-order routing by November 2012, under the terms of the multi-market operator environment defined by the Australian government in May 2011.

Fee Schedules There are various cost components that may be relevant, dependant on the access model proposed. A summary of the key components for each trading platform can be established with the ASX Market Access team. The Market Connectivity Fee Schedule is available from ASXOnline for a complete listing of potential costs, including those for the ALC.


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Application process

A Guidebook is available from ASXOnline to assist potential Participants identify the supporting documents that will be required to support an application – and understand the process for submitting an Application, progressing through the assessment phase to be Admitted as the relevant Participant type. This process can take between 4-6 weeks from submission of application, but is dependant on factors such as the proposed access model, completeness of supporting documentation and clearing arrangements. It is also important that the applicant is in liaison with the Australian Securities and Investment Commission (ASIC) to establish any additional requirements under ASIC’s Market Integrity Rules. The fees for making an application are outlined below, and all on-going transaction fees can be located in the relevant fee schedules available from ASXOnline.

Goods and Services Tax (GST) = 10%

Participant Type Platform Act for Clients Application and Administration Fee

Annual Fee

Market Participant (Broker) ASX Trade Yes A$100,000 + GST A$2,500 + GST

Principal Trading Participant

ASX Trade No A$25,000 + GST A$2,500 + GST

ASX 24 Trading Participant

ASX Trade24 Yes A$25,000 + GST Waived

ASX 24 Principal Trading Participant

ASX Trade24 No A$25,000 + GST Waived


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Further information

Any questions regarding the types of participation available to off-shore entities, or the application process in general, should be directed in the first instance to the ASX Customer Management team at +61 2 9227 0787 or via [email protected] An interactive Guidebook is available from the ASX website (www.asx.com.au/professionals/participants.htm) that provides an overview of the key obligations and considerations for becoming a Participant of the ASX – and will assist in determining the appropriate Participant type for your organisation.

Useful websites ASX Public Website http://www.asx.com.au ASXOnline https://www.asxonline.com/participants/index.html ASIC http://www.asic.gov.au For overseas enquiries Asia Andrew Musgrave Regional Manager, Asia +61 2 9227 0211 [email protected] Europe James Keeley Regional Manager, Europe +44 (0) 203 009 3375 [email protected] North America David Ritchie VP Regional Manager, North America +1 312 788 3363 [email protected]


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This is not intended to be financial product advice. To the extent permitted by law, ASX Limited ABN 98 008 624 691 and its related bodies corporate excludes all liability for any loss or damage arising in any way including by way of negligence. This document is not a substitute for the Operating Rules of the relevant ASX entity and in the case of any inconsistency, the Operating Rules prevail. © Copyright 2011 ASX Limited ABN 98 008 624 691. All rights reserved 2011.

Exchange Centre, 20 Bridge Street, Sydney NSW 2000. Telephone: 131 279 www.asx.com.au

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