Market Integrity Update - Quarterly Roll Reminder
The December 2017 ‘roll period’ is fast approaching, and we remind all ASX 24 market participants who participate in the roll of their obligations under the ASIC Market Integrity Rules (ASX 24 Market) 2010.
Rule 2.2.1 (ASX 24)
Market participants must have prudent risk management systems for limits and connections: Rule 2.2.1. This includes, but is not limited to:
- having limit setting and rejection capabilities in the order system that reflect prudent risk management
- having prudent risk management procedures that ensure the setting and documentation of appropriate pre-determined order and/or position limits for both their house and client accounts
- satisfying themselves that their clients have the skills, facilities and procedures to operate a market connection
- being responsible for all orders entered through their terminals by their clients, and
- ensuring that each order placed, and any order system used, comply with the market integrity rules.
Where necessary, we can give notice to a market participant requiring it to terminate a connection of a particular client, system or device, or class of system or device: Rule 2.2.1(2)(b).
Rule 3.1.2 (ASX 24)
A market participant must not make an offer or deal in a contract as principal if it intends to or is likely to have the effect of creating a false or misleading appearance of active trading in a contract or with respect to the market for, or the price of, a contract: Rule 3.1.2(1)(a).
In addition, a market participant must not make an offer or deal in a contract on account of another person if the market participant intends, or it ought reasonably suspect its client intends, to create a false or misleading appearance of active trading in a contract or with respect to the market for, or the price of, a contract: Rule 3.1.2(1)(b).
Behaviour that we will consider when reviewing the circumstances of principal and agency orders includes, but is not limited to:
- the frequency orders are placed
- the volume of each order placed
- the extent to which a market participant amends or cancels an order or proportion of these orders relative to the number of transactions executed
- whether the order or execution of the order would alter the market for, or the price of, the contract, and
- the time the order is entered or any instructions concerning the time of entry of the order.
Placing large volumes of orders and then cancelling a significant proportion of those orders risks misrepresenting genuine supply and demand and is detrimental to open and competitive price discovery.
Rule 3.1.3 (ASX 24)
A market participant must not enter orders where there is no intent to trade: Rule 3.1.3. Prohibited conduct may include:
- entering orders at price limits substantially higher or lower than the previous settlement price
- entering orders with unusually large volume levels, or
- placement, modification and cancellation of orders during the pre-opening phase with the intent of affecting the opening price of any contract.
ASX 24 market participants and their clients should also be aware that – depending on the circumstances of any potential misconduct – they may also be in breach of sections 1041A, 1041B, 1041G and 1041H of the Corporations Act.
We will continue to monitor this conduct and, where appropriate, take action to promote fair and efficient markets for futures contracts and futures options.