Chapter 4Other industry proposed reforms for ASX technology platform services
Introduction
4.1This chapter discusses other recommendations for reforms to the Australian Securities Exchange (ASX) technology platform services in the following areas:
access to the ASX Trade Acceptance Service;
ASX staggered open for all stocks;
moving to T+1 settlement for the ASX equities trading; and
investor access to holding statements in electronic form.
Access to the ASX Trade Acceptance Service
4.2The ASX developed the Trade Acceptance Service and makes it available to market operators so that trades executed on the trading platforms of those market operators can be cleared and settled by ASX Clear and ASX Settlement on the same basis as trades executed on the ASX’s market. The Trade Acceptance Service enables transactions in Clearing House Electronic Subregister System (CHESS) eligible ASX quoted securities effected through multiple approved trade execution platforms (Approved Market Operators) to be accepted by ASX Clear and ASX Settlement for clearing and settlement in an identical fashion to trades executed on ASX’s cash equity market.
4.3The National Stock Exchange of Australia (NSXA) indicated that it considered that the ASX may have misused its monopoly market power to frustrate other trade execution platforms. When seeking access to the ASX Trade Acceptance Service, NSXA contended that it experienced delays, discriminatory pricing, lack of transparency, and unfair market rules:
[ASX] has not provided transparent and non-discriminatory pricing and access to the clearing and settlement services and [ASX] has used many delaying techniques over the years to either slow or prevent access and/or entry. NSXA’s experience in gaining access to [Trade Acceptance Service] is one example. The process for NSXA to gain access to the [Trade Acceptance Service] took a total of three and a half years; for a service that was put in place for orderly access to market operators following its deployment for…Cboe.
4.4NSXA submitted that throughout the process of gaining access to the ASX Trade Acceptance Service, the ASX delayed NSXA through:
reviewing annual fees;
the introduction of a clearability assessment and an operations assessment to ensure that NSXA stock could be cleared, despite the same types of stock already being cleared for Cboe and the ASX;
requesting a supplementary application from NSXA on low-liquidity stocks; and
the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia's (RBA’s) involvement to develop Open Access Principles for licensed listing markets seeking access to ASX Clear.
4.5ASIC clarified some of the steps that took place for NSXA to gain access to the Trade Acceptance Service, included actions by regulators, which the ASX had limited control over:
NSXA and the ASX had to work through the ASX's decision to revoke a fee waiver for NSXA to access the Trade Acceptance Service because they were accessing it in a different way. This fee waiver had applied in previous years. Between June 2017 and 2018, they had multiple discussions around that new fee structure. The Council of Financial Regulator agencies confirmed the regulatory expectations, and broad agreement was reached between June 2017 and April 2018.
In September 2018, the ASX put to the Council of Financial Regulator agencies a proposal to undertake a clearability assessment. In March 2019, the Council of Financial Regulators began developing open access principles, which is an adjunct to the regulatory expectations. This provided further guidance on access to the ASX's clearing services when the listing market is seeking access.
Consultation occurred on the open access principles with the ASX and NSXA between April 2019 and November 2019, at which the open access principles were settled by ASX and NSXA. It was also agreed by all parties that the operating rule changes at both the ASX and NSXA needed to be made before access to the trade acceptance service could be granted. The ASX's operating rule changes were approved the same month, and NSXA commenced using the Trade Acceptance Service in November 2020.
In August 2020, the Council of Financial Regulators went through its governance processes to supplement the regulatory expectations and publish the open access principles in October 2020.
4.6The ASX provided the committee with its view of the timeline, which is set out in the footnote below.
4.7The ASX argued that from its perspective, ASX Clear and ASX Settlement have provided access to clearing and settlement services to non-affiliated market operators on non-discriminatory terms for over a decade via the Trade Acceptance Service and Settlement Facilitation Service. The ASX indicated that it remains committed to fulfilling its licence and other regulatory obligations, including that the services of each licensed clearing and settlement facility are provided fairly and effectively and in compliance with the Regulatory Expectations.
Committee view
4.8The committee notes that there continues to be a divergence of views on whether ASX Clear and ASX Settlement provide Trade Acceptance Services on a non-discriminatory basis. The ASX argues that ASX Clear and ASX Settlement have been using a non-discriminatory basis for some time, while NSXA disagrees. The committee notes that arranging NSXA access triggered a range of actions involving regulators and that, as a result, some of the elapsed time was beyond the control of the ASX. Nevertheless, the 3.5–year delay seems excessive, and the committee encourages all parties involved in such negotiations to find more timely paths to progress such adjustments.
4.9The committee acknowledges that the competition in clearing and settlement reforms are intended to address the non-discriminatory provisions of clearing and settlement services. The committee notes that potential paths forward include making use of the reforms.
Staggered open of ASX equities trading
4.10Major global stock exchanges commonly have opening auction mechanisms in place, and the ASX is no exception. However, the ASX is set apart by the method in which it uses to stagger the opening times of the cash equity market. For example, on a trading day, the ASX equities trading has a staggered open for stocks. This process involves categorising listed companies alphabetically into five groups, each with a designated time slot. The staggering of opening times happens between approximately 10:00 am and 10.09 am, providing a systematic structure to the process.
4.11The Financial Services Council (FSC) argued that the staggered open requirement of the ASX equities trading is outdated and does not align with best practices used in other markets, given technology improvements over the last 20 years.
4.12Mrs Bianca Richardson, Policy Director from the FSC explained how the staggered open leads to price risk for Exchange Traded Fund operators:
Under the ASX staggered process, instead of all the securities and [Exchange Traded Funds] opening at the same time, it effectively means that securities and the [Exchange Traded Fund] will then open alphabetically at set times between 10 am and 10:09 am. From an [Exchange Traded Fund] perspective, the underlying stock may not be trading when the [Exchange Traded Fund] is actually trading. This creates pricing risks for the [Exchange Traded Fund].
4.13The FSC recommended that the ASX staggered open should be removed or that an interim measure be implemented which would move the Exchange Traded Funds to the end of the ASX market open framework. The FSC explained the options:
An interim measure that we suggested was, if you couldn't remove the auction open, which might be a bigger system change, whether [Exchange Traded Funds] could be moved to the end of the auction open process. We understand that it effectively would mean two changes for participants in the market. So there is a preference to address the key issue, which more participants want, which is getting rid of the auction open entirely.
4.14The FSC suggested that the delays in the ASX CHESS Replacement Project may have delayed the removal of the staggered open.
4.15The ASX responded to the FSC recommendation, indicating that:
The staggered open for securities has been in place for some time to facilitate order management by ASX market participants during the opening of the equity market.
The ASX acknowledges that a single opening time is the globally accepted method for opening equity markets and notes that it would reduce technical and operational complexities on both a regular basis and during recovery from an outage event.
4.16The ASX indicated it had previously consulted market participants in 2018 on a proposal to remove the staggered open and decided to retain the staggered open at that time:
On 21 March 2018, ASX released a consultation paper on the Management of the ASX Market that included a proposal to remove the staggered open. Respondents expressed a range of views regarding the proposal, with eight favouring the removal of the staggered open whilst six respondents supported maintaining it. Four respondents did not express a view. ASX considered all feedback in relation to the proposal, and further considered the impact on market practice and the effort required by participants in adjusting to the proposal.
In light of these considerations, ASX decided to maintain the staggered open for the near term, whilst committing to further explore possible ways of simplifying the opening process.
4.17More recently, following the upgrade of ASX trade, the ASX has continued to engage with customers on the opening of the equity market and indicated that the ASX intends to remove the staggered open in 2024.
Committee view
4.18The committee thanks the FSC for bringing the staggered open issue to the committee's attention. From the evidence it has received, the committee observes that the ASX has been consulting with market participants who provided mixed views. The ASX has indicated its intention to remove the staggered open in 2024. The committee welcomes these developments and considers that it appears unlikely that the government or regulators need to intervene on whether or when the staggered open is removed. However, it would be appropriate for ASIC to pay close attention to the arrangements for removing the staggered open to ensure that there are no disruptions to the market.
Moving to T+1 settlement for trading equities
4.19As outlined in chapter 2 of this report, stock trades on the ASX are settled in two business days (T+2) after the trade was executed (on dayT). Internationally, some markets have indicated intentions to implement settlement on day T+1.
4.20The FSC noted that the United Stated (US) is moving to T+1 settlement in 2024, which will shorten the settlement of trades to one business day after the trade is made. Computershare also drew attention to other markets potentially moving to T+1, including Canada, the US, the United Kingdom, and the European Union:
Markets are progressing towards a T+1 settlement cycle, from the current T+2 standard. The US and Canada have confirmed deadlines for transition to T+1 in late May 2024. Other markets, including the UK and the European Union are studying the impact of T+1 settlement, with recommendations expected later in 2023.
4.21In a report commissioned by FinClear, Mandala also drew attention to markets considering moves to T+1 settlement and noted that T+1 settlement has been occurring in China since 2015 and India since February 2023.
4.22The FSC indicated that a change to T+1 would have implications for Australian Exchange Traded Fund managers. For example, for the settlement cycle of creation orders where an Exchange Traded Fund is holding US securities, Australian clearing and settlement facilities currently require trade matching at 11:30 am which is only a short time after the US market closes. The FSC suggested that there are opportunities to bring forward new technologies and ideas in clearing and settlement, including considering later settlement matching or having an efficient mechanism to adjust the settlement when the value is not finalised in time for matching to align with the US moving to T+1 settlement next year.
4.23Computershare raised related concerns about the impact on investors of overseas markets moving to T+1 settlement:
This will put pressure on the Australian investment community who regularly interact with the North American equities markets, and on those with Australian-domiciled products (e.g. [Exchange Traded Funds]) that consist of underlying US assets, to upgrade cross-border business practices.Importantly, the move to T+1 by North American equities markets in 2024 will bring pressure on all international exchanges (including ASX) to follow suit for conformance, business efficiency, market inter-connectedness and competitive reasons.
4.24Computershare also noted that moving to T+1 for clearing and settlement is a significant market change, halving the time for post-trade pre-settlement processes.Computershare suggested that planning and resourcing for moving to T+1 settlement will need to be considered for current systems and the CHESS Replacement Project. Hence, Computershare recommended that the ASX should also prepare the market for the introduction of T+1 settlement and progress other critical market initiatives to ensure that the Australian market keeps up with changes being made in international markets.
4.25The ASX indicated that it was aware of and actively seeking information on the international context for clearing and settlement timeframes. The ASX confirmed that it can support T+1 settlement on the existing CHESS system and is designing the new CHESS to support T+1 settlement. The ASX also noted that the current settlement timeframe is less that T+2 settlement in practice:
Worth noting is that one thing that is interesting in Australia, even today, is that our T+2 is really about T+1½ because we actually settle midday on T+2, so it is already a quite short settlement cycle, which effectively means that, for example, for customers in the US who are trading Australian securities, it is already T+1, in effect, due to the time zone.
4.26The ASX indicated that it had begun discussions with industry stakeholders about moving to T+1 settlement in Australia. The ASX noted that it had given presentations to and surveyed Business Committee members to understand what a transition could look like, as any changes to the settlement cycle require significant engagement with the industry and a broad consensus with impacted stakeholders. The ASX also noted that the move from T+3 to T+2 settlement in 2016 provided information that can inform the move to T+1 settlement.
4.27The ASX indicated in June 2023 that there had been mixed views from industry members regarding the desirability of moving to T+1 settlement in the Australian market. The ASX also noted in October 2023 that it had recent discussions with industry participants on moving to T+1 settlement and that there continues to be a mixture of views about whether T+1 settlement is advantageous for the Australian market.
What we are really working with the market on is what the consensus view is in terms of if and when Australia wants to shift to T+1. So it is very much a discussion with the whole market, and, not surprisingly, it is a topic that came up at the most recent advisory group meeting.
4.28The new ASX Cash Equities Clearing and Settlement Advisory Group had initial discussions on the timing and decision-making for a move to T+1 settlement and identified that while it may not raise significant concerns for the ASX, issues for market participants will be discussed in early 2024.
4.29ASIC noted that there are advantages and disadvantages of moving to T+1 settlement, such as:
Significantly increased settlement failure rates is a potential disadvantage:
By significantly shortening the cycle that is available for getting the securities and the funding into the right place, particularly in, for example, the US time zone, it might shift to customers needing to pre-fund those transactions or cause funding challenges.
Advantages of the shorter settlement period included:
reducing counterparty risk for individual investors, participants, and the central counterparty, resulting in reduced systemic risk for the market;
reducing the regulatory capital required to be held by market participants to mitigate risk;
standardising regional and global settlement practices; and
driving greater post-trade operational and process efficiency and associated cost savings.
Committee view
4.30The committee notes the FSC proposal to move ASX equities trading to T+1 settlement. From the evidence it has received, the committee understands that the ASX can implement the proposal, has consulted with industry participants, and is open to making the changes when industry is ready. The committee supports moves by the ASX and industry participants to implement the T+1 settlement in a timeframe that aligns with international developments and the Australian industry's readiness to make the move. The committee notes that the changeover to T+1 settlement could temporarily affect both market operations and financial stability. Therefore, the committee encourages ASIC and the RBA to carefully monitor the implementation of T+1 settlement for cash equities trading in Australia.
Access to electronic CHESS holding statements
4.31The FSC informed the committee that some brokers and share registries still send investors' information and statements in paper form. The FSC argued that there are opportunities to increase the efficiency and achieve potential cost reductions on an industry wide basis which could be used to lower overall costs for investors.
4.32Computershare raised similar concerns about the lack of electronic communication to shareholders in documents attached to its submission, noting that paper statements and communication substantially contribute to the high cost imposed on share issuers. Computershare suggested consideration be given to mechanisms to facilitate electronic delivery while still ensuring investor protection.
4.33The FSC noted that the voluntary nature of the current requirements for email addresses means that only a small number of Exchange Traded Fund investor email addresses have been provided via CHESS, and product issuers do not have investor email addresses to enable electronic communication with investors.
4.34The FSC expanded further on the implications of not moving to electronic communications:
Instead, fund managers send paper-based communication to an investor’s residential address which is considerably more costly, as well as less environmentally friendly, than sending the same communication via email and avoiding paper, printing and mailing cost. This is an extremely inefficient means of communication in an era where consumers frequently elect to receive communication electronically over paper based communication. With over 1.9m Australian [Exchange Traded Fund] investors, who may also hold multiple [Exchange Traded Funds] there is the potential for considerable cost reductions by facilitating further electronic communications. Furthermore, the investment information may be more timely provided electronically than via mail which may be a few weeks old by the time the investor receives it.
4.35The FSC suggested that the current voluntary approach for brokers to provide investors email addresses via CHESS should be changed to mandatory now that CHESS and other systems have the capability for electronic communications:
We understand the ASX has undertaken a lot of work to engage with brokers, as well as making the requisite CHESS changes, to enable the provision of investor email addresses from brokers to register providers and product issuers via [clearing and settlement] services. CHESS enables this, however the provision of an [Exchange Traded Fund] investors’ email address from the broker via CHESS is voluntary.
4.36Hence, the FSC proposed that it be mandated that brokers are required to pass through email addresses for new and existing clients to CHESS which in turn passes these onto the registry providers and Exchange Traded Product issuers.
4.37The ASX website indicates that electronic delivery of CHESS holding statements and notifications has enabled investors to opt-in by asking their broker to provide contact details to the ASX. The ASX provided a detailed technical and process factsheet to provide information for brokers that wish to offer this service to their customers. It explains how to opt customers in and out of receiving electronic communications, the fee waiver for opting in, new processes for undeliverable emails and returned mail, and provides an overview of the CHESS statements portal.
4.38The ASX confirmed that effective 1 July 2022, share issuers will not be charged for electronic holding statements issued to holders. Some brokers (including Nabtrade, Pearler, Selfwealth, and Stake.) advertise that they have implemented electronic holding statements. CommSec indicated that it plans to enable customers to make use of electronic communication for access to CHESS related statements via the ASX eStatements service on an opt-in basis.CommSec noted that:
There are privacy considerations with mandating the provision of investors’ personal information beyond the ASX. There needs to be assurance that if information is shared with third parties, such as registries, it is only used for the purpose for which it is collected.
CommSec recognises that from an accessibility perspective, the use of email may not be the preferred channel of choice for some customers, and so alternative options are made available.
4.39CommSec also emphasised that the ASX eStatements service is an electronic facility and is not an email service, although it requires the provision of the investor’s email address to the ASX. CommSec added that:
CommSec recognises the opportunity to increase efficiency for both industry participants and investors who use CHESS, and to create a safe repository for digital information for our customers who invest in equities and exchange-traded funds.
We recognise that an online facility to securely retrieve information is safer than sending by email. CommSec supports facility provision of confirmations and acknowledges that the ASX eStatements service is a facility, not an email service.
Committee view
4.40The committee considers it appropriate to make electronic CHESS holding statements available to any investors who prefer to receive information via electronic means. From the evidence the committee has received, the ASX has done what it can to enable electronic CHESS holding statements. Some brokers have implemented that for investors, while others have not. Hence, the committee considers that if there is no significant movement by brokers soon, Treasury should investigate the matter to identify and resolve any remaining impediments.
4.41The committee recommends that if there is no significant movement by most major brokers by mid-2024 on making electronic Clearing House Electronic Subregister System (CHESS) holding statements available to any investors that want them, Treasury should investigate the matter to identify and resolve any remaining impediments.
Entity agnostic regulations for titles and transfers
4.42Computershare indicated to the committee that it was concerned that the provisions in the Corporations Regulations 2001 for titles and transfers of securities were not entity agnostic and were therefore a potential barrier to competition in clearing and settlement. Specifically, Computershare submitted that:
Given the evolution of the electronic settlement system with the introduction of CHESS, the provisions of Part 7.11 of the Corporations Regulations, which govern title and transfer of securities by electronic messages, refer specifically to…ASX Settlement & Transfer Corporation, a predecessor entity to the current ASX Settlement. This is the case even if the framework of Division 4 of Part 7.11 contemplates a "prescribed [clearing and settlement] facility" which should have been agnostic as to the operating legal entity. If a competitor operator of a [clearing and settlement] facility emerges, it is unclear if the intent would be to amend these Regulations to become neutral to any prescribed [clearing and settlement] facility, or if bespoke Regulations would be issued for the new [clearing and settlement] facility.
4.43Computershare recommended the government and regulators consider and communicate their intended approach to remove the title and transfer barrier to competing clearing and settlement facilities, including the potential for other clearing and settlement facilities to offer services with respect to the same asset classes as ASX (e. g. listed cash equities) or for different asset classes (e. g. unlisted securities).
4.44Cboe noted related concerns on titles and transfers:
ASX Settlement, through its management of Australia’s [Central Securities Depository] and dual investor register via [Holder Identification Numbers] within the CHESS system, has built itself a walled garden as it relates to legal title transfer and ownership. Access to ASX Settlement's transaction function, which facilitates settlement of cleared positions and transfer to underlying investors' HINs, is essential for the smooth operation of any competing [central counterparty].
4.45The committee requested a response from ASIC on the issues and recommendations on the regulation of titles and transfers raised by Computershare. ASIC indicated that the Corporations Act 2001 enables clearing and settlement facilities to be prescribed by the Corporations Regulations 2001. The regulations are designed to facilitate competition and do not require transfers to occur in a particular way:
As set out in paragraph 16 of the Revised Explanatory Memorandum to the Financial Services Reform Bill 2001, Part 7.11 was designed to facilitate competition between clearing and settlement facilities in the settlement of securities transactions and to provide greater flexibility in procedure to accommodate future developments, by:
• omitting the special position of ASX's Securities Clearing House; and
• providing for the detailed procedural provisions to be made in the regulations.
In line with these policy objectives, the primary law refers generally to a “prescribed [clearing and settlement] facility” and does not require transfers to be effected in a particular way, with the supporting architecture for the mechanism employed by a particular prescribed [clearing and settlement] facility to be included in the regulations. The provisions in Division 4 of Part 7.11 of the Regulations are, therefore, specifically tailored to the licensed [clearing and settlement] facility operated by ASX Settlement.
4.46ASIC further confirmed that:
Currently ASX Settlement is the only prescribed clearing and settlement facility for the purposes of Division 4 of Part 7.11 of the Corporations Act 2001.
A competing licenced clearing and settlement facility could seek to be prescribed by the regulation.
Transfers of relevant securities effected otherwise than through a prescribed clearing and settlement facility may be effected in accordance with the provisions of Division 3 (including the detailed requirements prescribed by the Regulations for the purposes of that Division).
4.47ASIC provided further details on how a competing clearing and settlement facility could seek to be prescribed under the division 4 mechanism:
In order to benefit from the Division 4 mechanism, a licensed [clearing and settlement] facility would need to be prescribed by the Regulations. ASIC is not the relevant decision-maker for this purpose…the Minister is expected to have regard to the adequacy of the arrangements for the transfer of title pursuant to the provisions of Division 4 of Part 7.11 (including associated regulations), and any stamp duty issues arising, before recommending that a [clearing and settlement] facility be prescribed for the purposes of this Division. This will involve detailed consideration of the facility’s operating rules. It is likely that bespoke Regulations would need to be made if a competing settlement facility were to emerge.
Committee view
4.48The committee thanks Computershare for raising the issue of entity agnostic titles and transfers. Subsequent information received from ASIC indicates that some of the existing regulatory arrangements may address Computershare’s concerns because a competing clearing and settlement facility could seek to be prescribed in the Corporations Regulations 2001.
4.49The committee observes that the requirement for a competing clearing and settlement facility to be prescribed may be a barrier for a new entrant, however, the requirement:
Appears to provide an important mechanism for regulators to ensure that a competing clearing and settlement facility would have the appropriate capacity and systems to handle titles and transfers.
The application to be prescribed could be progressed in parallel with seeking to meet other regulatory requirements of a clearing and settlement facility.
Operating rules
4.50This section discusses concerns raised by industry participants about the ASX using its operating rules for market power.
4.51Computershare described how the securities record-keeping operating rules may allow the ASX to exert power over market participants:
At present, the ASX Group entities control most aspects of rulemaking for the structure and administration of all dematerialised (uncertificated) securities registers in Australia. Under the ASX Settlement Operating Rules, ASX Settlement prescribes the structure and operation of the CHESS subregister…In addition, ASX Listing Rules Chapter 8 prescribe the operation of many aspects of issuer sponsored holdings, unrelated to interaction with the CHESS subregister or operating environment. This is derived from ASX’s historical role as the defined and only operator of a [clearing and settlement] facility, prior to the policy-shift to support competition.
This gives the ASX Group significant power over the operations of securities recordkeeping. The Corporations Act and Regulations do not make any direct provision for registration and transfer of dematerialised securities – this is governed primarily by the various ASX rulebooks. In our view, this creates a real risk of ASX inhibiting fair and effective competition by controlling the requirements for operation of the subregisters, as well as access to them.
4.52In its submission, Computershare argued that ASX should face greater scrutiny over the use of its rule-making authority because, during the CHESS Replacement Project, ASX issued hundreds of pages of draft rule amendments that would have the effect of embedding processes and structures that disadvantage various stakeholders’ established market positions. Hence, Computershare recommended that the government and regulators consider whether ASIC should have responsibility for some rules for clearing, settlement, and securities administration.
4.53ASIC responded:
Computershare’s suggestion to consider whether ASIC should have responsibility for some operating rules is a matter for Government. However, we consider the disallowance powers provided to the Minister (or an ASIC delegate) are broadly sufficient. Implementing Computershare’s proposal for ASIC to directly write operating rules for clearing houses and settlement facilities would be out of step with other international regulatory regimes and international regulatory standards for financial market infrastructure.
4.54ASIC informed the committee that it currently has a significant role in reviewing operating rules made by a clearing and settlement facility:
Changes to the operating rules must be notified to ASIC within 21 days and are subject to disallowance for a period of 28 days after ASIC receives the notice. In deciding whether to disallow all or a specified part of the change, the Minister or an ASIC delegate must have regard to the consistency of the change with the licensee’s obligations, any matters specified in the [clearing and settlement] services rules (once made), and other matters specified by the Corporations Act. Following the passage of the Treasury Laws Amendment (2023 Measures No. 3) Act 2023, this now includes any relevant advice received from the ACCC. Consequently, in addition to ASIC’s own consideration of the impact of any proposed rule changes on competition, ASIC will also seek the advice of the ACCC on the potential impacts on competition of the proposed rules.
4.55ASIC indicated that it and the RBA provide advice to the Minister or delegate on all operating rule changes and consider whether the ASX’s consultation with industry was appropriate:
ASIC and the RBA review and provide advice to the Minister or the delegate of the Minister on all operating rule changes, which includes a recommendation on whether to disallow all or part of a change. We assess and consider the proposed rule changes before they are made, and in many instances such as the proposed CHESS Replacement Rules referred to by Computershare involves extensive discussion with the regulators. Aparticular consideration for us in such a technical set of rules was ASX’s stakeholder engagement and consultation and its response to feedback received from consultation.
4.56ASIC also confirmed that in exercising the delegated power discussed above, it should promote competition:
In addition, where a senior staff member of ASIC exercises the power to part of a change to the operating rules of a licensed [clearing and settlement] facility as a delegate of the Minister, they must do so in accordance with the Guidelines for the Exercise of Powers Delegated to ASIC under Chapter 7 of the Corporations Act. Notably, this includes a requirement to ensure, to the degree practicable, that the exercise of any delegated power promotes competition.
4.57ASIC noted that in 2016, the Minister delegated to ASIC a range of market and clearing and settlement facility regulatory powers, including the power to grant a licence, disallow changes to operating rules, and suspend or cancel licences. The financial market infrastructure reforms will legislate the transfer of the delegated powers to ASIC and, in some specific instances, to the RBA (see chapter 2 for more details).
Committee view
4.58The committee thanks Computershare for raising its concerns about market power and the ASX operating rules. The committee also thanks ASIC for its responses to the Computershare submission.
4.59Based on the ASIC responses, the committee observes that there are significant opportunities for ASIC to scrutinise and oversee the ASX operating rules. The committee notes that the proposed financial market infrastructure reforms will further clarify the powers of the Minister and ASIC. Hence, the committee is not persuaded to make any recommendations for changes to the oversight of the ASX operating rules.