Market Infrastructure Licensee
Market Integrity is essential for fair and transparent trade. ASIC plays an oversight role as a regulatory body to ensure that operators of clearing & settlement facilities, financial markets, and derivative trade depositories play by the rules. They do this by licensing and regulating all the market operators. Below are the three categories of market infrastructural licensees.
Financial Market Operators
A financial market is a facility through which financial products are bought and sold. To operate in this market, you must have a license. The other alternative is if you are exempted from such licensing requirement.
Determining whether you are operating in a financial market or not may be difficult, but the ASIC guidelines have simplified it. You will be deemed to be operating in the financial market if your business;
- Receive and accept offers for acquisition and disposal of financial products or
- Receive invitations and offers for acquisition or disposal of financial products which are intended to lead to making offers to acquire or dispose of a financial product or to accept such offers.
As a financial market operator, you are required to operate in a fair, orderly, and transparent manner, make provisions for compensation agreements if your market offers intermediate retail services, fulfil the conditions of the license, have a conflict management system, ensure anyone who is disqualified is not involved in your licensee operations, etc.
Clearing and Settlement Facility
This facility provides financial products transaction clearing and settlement services. It is regulated by the Royal Bank of Australia and ASIC and operative in the market must have a license or be exempted from that requirement by the Minister. When it comes to getting licensing in this market, the decision is with the Minister and ASIC mainly advise the Minister on the applications, exemptions, and all other matters relating to Clearing and Settlement facilities.
There are criteria in place which must be met to ensure that you will get the license. It remains in the discretion of the Minister to grant you a permit or refuse it, and in exceptional cases, exempt you all together. Many obligations exist that a CS operator must comply with and the ASIC monitors operators and the market, in general, to assess their compliance and where anyone is noncompliant, enforce sanctions and prohibition.
Derivative Trade Depositories
These facilities receive reports of derivative trade positions and information on derivative transactions. There are rules in place that establish obligations as to reports on derivative transactions, clearing of derivative transactions, and execution of derivative transactions. The Corporation Act 2001 stipulates that any Trade Depository wishing to receive derivative trade data in line with the obligations for mandatory reporting must have a license.
A DTR facility must comply with the rules and regulations in the ASIC Derivative Transaction Rules (Reporting) 2013 and ASIC Derivative Trade Repository Rules 2013. Both Australian and overseas operators can apply for this license, and they are expected to meet some criteria for them to be granted the license.