ASIC has released the findings of its fifth assessment of the Sydney Futures Exchange Limited (SFE) and SFE Clearing Corporation Limited (SFECC), and its third assessment of Austraclear Limited (Austraclear).
Following the merger of the ASX and SFE in July 2006, the SFE licences are now under the umbrella of the ASX group. ASIC’s next assessment of ASX, which commences in November, will encompass all six entities in the ASX group that hold a market licence or a clearing and settlement facility licence. Accordingly, this will be the last stand-alone report in relation to SFE.
ASIC has concluded that during the assessment period, SFE had adequate arrangements for supervising the market, including arrangements for:
handling conflicts between its commercial interests and the obligation to operate the market in a fair, orderly and transparent way;
monitoring the conduct of participants; and
enforcing compliance with its rules.
ASIC has also concluded that SFECC and Austraclear have adequate arrangements for supervising their respective clearing and settlement facilities including arrangements for:
handling conflicts between its commercial interests and the need to ensure that the clearing and settlement facility's services are provided in a fair and effective way; and
enforcing compliance with its operating rules.
SFE’s supervision arrangements have now been folded into ASX Market Supervision Pty Ltd (ASXMS), following the merger. ASIC assesses the efficiency and effectiveness of the combined arrangements on an ongoing basis through its regular interaction with ASXMS. It will report its findings after the next assessment of the ASX group.
In August this year, SFE experienced technical problems that resulted in the halt of the trading platform while the problems were rectified. This event occurred outside the period covered by the report, and so it has not been referred to in detail. ASIC is continuing a useful and open dialogue with ASX about technology issues and ASX’s plans for system upgrades and replacement programs going forward.
A financial market is defined as a facility through which offers to buy and sell financial products are regularly made. Anyone who operates a financial market in Australia must obtain a licence to do so, or otherwise be exempted by the Minister.
As part of the conditions of granting a licence to operate a financial market, the licensee must supervise the market in accordance with Part 7.2 of the Corporations Act.
Under the Corporations Act, ASIC is required to conduct an assessment of how well licensed financial markets are complying with their obligations to supervise their markets. ASIC must do this at least once per year in relation to each licensee. ASIC can also assess how well a licensee is complying with its other obligations under the Act.
Clearing and settlement facility
A clearing and settlement facility is defined under the Corporations Act as a facility that provides a regular mechanism for the parties to transactions relating to financial products to meet obligations to each other. Anyone who operates a clearing and settlement facility in Australia must obtain a licence to do so, or otherwise be exempted by the Minister.
As part of the conditions of granting a licence to operate a clearing and settlement facility, the licensee must supervise the clearing and settlement facility in accordance with Part 7.3 of the Corporations Act 2001.
ASIC is required to conduct an assessment of how well a licensed clearing and settlement facility is complying with its obligations to supervise the facility. ASIC must do this at least once per year in relation to each licensee. ASIC can also assess how well a licensee is complying with its other obligations under the Act.