ASIC Provides Further Guidance on Internal Market Making

The updated guidelines follow on from ASIC’s review of internal market-making in H2 of 2019.

The Australian Securities and Investments Commission (ASIC) announced this Wednesday that it has updated its information sheet on exchange-traded products to provide further guidance to firms such as Australian exchanges, market-making execution agents, and product issuers.

In particular, the regulator has updated Information Sheet 230 Exchange-traded products: Admission guideline. The updated document providers additional information on better practices for internal market-making in non-transparent, actively managed funds that are traded on exchange markets, the regulator said today.

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The updated guidelines follow on from ASIC’s review of internal market-making, which occurred in the second half of last year. Specifically, the update highlights how they can manage market integrity risks associated with internal market-making.

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In the statement published today, ASIC said that firms should:

  • only use a reference price or other information that is publicly available as the input for market-making quotes;
  • establish information barriers so that bids and offers are not submitted to the market by persons or systems with knowledge of the current portfolio holdings;
  • have adequate arrangements for identifying and responding to instances of substantial information asymmetry in the market; and
  • have appropriate compliance and supervision arrangements to support these measures.

In addition, the update also provides relevant firms with guidance on improving internal market-making practices, such as the indicative net asset value (iNAV) being as accurate and frequently disseminated as practicably possible, among other guidelines.

ASIC steps up market supervision

Today’s announcement follows on the heels of the Australian regulator, revealing that amid COVID-19, it has stepped up its market supervision to ensure its markets remain fair and orderly, in order to ensure that investors are appropriately informed and protect against market abuse.

Furthermore, as the Aussie watchdog deals with COVID-19 and tries to ensure the integrity of its markets, ASIC will be deferring some of its activities and reassign some of its staff to address issues of immediate concern.

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