ASIC Update on Crossing Reporting
Market participants operating crossing systems are reminded of their obligations, under Part 4.3 of the ASIC Market Integrity Rules (Competition in Exchange Markets) 2011 (‘Competition MIRs’). ASIC has issued guidance on the obligations arising from operating such systems. These can be found in Section E of Regulatory Guide 223, Guidance on ASIC market integrity rules for competition in exchange markets (‘RG 223’).
Under the MIRs, a crossing system is ‘any automated service provided by a Participant to its clients which matches or executes Client Orders with Orders of (a) the Participant; or (b) other clients of the Participant’. This means that any automated and or systematic matching of client orders may be subject to the rule, including participants’ use of vendor-provided crossing-system solutions. This includes a system that matches an order with an order currently reflected in the market. For example a system that identifies orders in the market operator’s order books that it can match and report as priority or NBBO crossings. Orders matched on-market by a market operator’s trading system that are “accidental crossings” are not subject to this reporting.
Participants operating such systems also have reporting and notification obligations under Part 4.3 of the Competition MIRs. In particular, participants are required to send a Crossing System Initial Report (‘Initial Report’) no later than 20 business days before the participant begins to operate the crossing system. This places an obligation to self report on crossing systems, and address at least the matters listed at Table 11 of RG 223. Once the system is operating, participants are required to send a Crossing System Monthly Report (‘Monthly Report’) within 20 business days of the end of the previous month. This report needs to include the daily aggregated information on orders and trades (as per Competition MIR 4.3.3), and any changes provided in the Initial Report. For example, a participant changing its method of matching and executing trades, including moving from ASX’s priority crossing to reliance on the off-order book ‘at or within the spread’ exception, or reporting to a different market operator, should notify ASIC in its Monthly Report. For more information, participants should contact their ASIC relationship manager.
Participants are also reminded that the Monthly Report must comply with the guidance in paragraphs 199-203 of RG 223, including the file name and file type. ASIC is finding that some crossing system operators are not following the correct format, and not using the correct identifier for the crossing system. ASIC can provide participants with a sample report on request.
We look forward to industry’s cooperation in this matter, and remind participants there are penalties (up to a maximum of $100,000) for failing to take account of these obligations.