ASIC Provides Regulatory Approvals for a Proposed New Product and ETFs for the Chi-X market

ASICASIC has updated the market integrity rules to facilitate the introduction of a new type of financial product that securities and derivatives exchange Chi-X Australia Limited (Chi-X) is introducing to its market, known as transferable custody receipts (TraCRs).

The updated rules include TraCRs in the definition of ‘cash market products’ in Rule 1.4.3 of the new consolidated rulebook, the ASIC Market Integrity Rules (Securities Markets) 2017. This will allow appropriate market supervision arrangements for TraCRs by bringing these products into ASIC’s market supervision framework.

In order to quote and trade TraCRs on the Chi-X market, Chi-X has also obtained regulatory approvals for:

  1. variation to its Australian market licence
  2. declaration under s1075A(1)(b) of the Corporations Act for TraCRs
  3. amendments to the Chi-X operating rules.

The issuer of TraCRs, Deutsche Access Investments Limited, has also obtained relief in relation to the TraCR product (see instrument 17/0995 in ASIC Gazette A56/17).

Chi-X published a consultation paper proposing changes to its operating rules and procedures to allow for the introduction of TraCRs to the Chi-X market. TraCRs are units of beneficial ownership in equities listed on certain overseas exchanges, where the foreign equities are held in custody for the issuer of the TraCRs. They are ‘unsponsored’ in the sense that TraCRs are issued and quoted on the Chi-X market without the consent or involvement of the overseas equity issuer.

In 2015, ASIC also consulted on extending existing ASIC relief instruments to facilitate the quotation and trading of exchange traded funds on the Chi-X market, and to extend relief from s1017B in [CO 13/721] to cover managed fund products quoted on ASX (refer:  Consultation Paper 235: Proposed amendments to ASIC market integrity rules and instruments for the Chi-X investment product market(CP 235).  ASIC has now made the following instruments as consulted upon in CP 235:

  1. ASIC Corporations (Amendment) Instrument 2018/3 which, on 31 May 2018 amended the following ASIC instruments:
    1. ASIC Class Order [CO 10/288]
    2. ASIC Class Order [CO 13/655]
    3. ASIC Class Order [CO 13/721]
    4. ASIC Class Order [CO 13/1200]

The amendments made to these instruments includes relief for product issuers, authorised participants and market makers of Chi-X ETFs. Changes have also been made to the exchange traded fund definition in these instruments to ensure that it reflects the key characteristics of this product and is market neutral in relation to the ASX and Chi-X markets. We also extended the existing relief from s1017B in [CO 13/721] to cover managed fund products quoted on ASX.

2. Class Waiver 2018/311 replaces Class Waiver 13/680 and took effect on 1 May 2018. This extends relief from Rule 6.1.1(1) of the ASIC Market Integrity Rules (Securities Markets) 2017, to Chi-X participants where they enter into a ‘Exchange-Traded Fund Special Trade’ transaction on the Chi-X market.