This market notice is being issued to provide an update on the Pre-Trade Risk Management (PTRM) reforms. On 24 July 2019, ASX published Notice 0738.19.07 setting out new Conditions of Licence for Market Operator Software contained in the ASX 24 Operating Rules and Procedures to limit the number PTRM message rejects that can occur, (the “Procedure”), effective 2 September 2019. Further guidance was issued subsequently in Notice 0894.19.08.
The intention of the Procedure and subsequent guidance is to address behaviour where PTRM is being used as an order management tool, with excess messages rejected by PTRM functionality, rather than for risk management. Not all Participants have demonstrated this use of PTRM. ASX’s actions in these reforms have been to ensure that PTRM is used only for its intended purpose, as promptly as possible. ASX has noted feedback regarding some short term issues in complying, and has taken further steps to phase in the approach for certain Participants. In addition, ASX will seek feedback on the effectiveness of the Procedure via an upcoming consultation paper in relation to the bond roll. The bond roll consultation paper is to be released shortly.
Trading Participants - No Action
As outlined in the previous Notice 0894.19.08, ASX has granted a class waiver to waive the obligation to comply with the Procedure for any Trading Participant that is permitted to trade on behalf of Clients, as those terms are defined in the ASX 24 Operating Rules. It is a condition of granting the class waiver that the waiver may be withdrawn for an individual participant where ASX observes persistent inappropriate usage of PTRM. This is in effect from the 2nd September 2019 and until the outcome of the consultation on the bond roll is determined. These Participants have specifically highlighted that they would otherwise need to perform technical development to ensure they have real-time monitoring of clients’ activity to ensure compliance with the Procedure at all times.
Additional Waivers Granted in Relation to This New Procedure
ASX has also granted limited individual waivers from the Procedure to four Participants, due to the level of technical change that they advised was required in order to comply fully with the Procedure.
The individual waivers will limit those Participants to 2 message rejects per second at the FIX session level. In addition there are a set of conditions to ensure those Participants demonstrate that they are on track to comply with the Procedure fully (i.e. at the Participant level) by 3rd December 2019. These waivers will be published in accordance with ASX’s standard procedure.
As a result of the individual waivers, ASX anticipates that the number of PTRM reject messages will be reduced for the September roll, but not eliminated. A phased approach will therefore apply for the interim period and the full effect of the rule will be implemented and enforced 3rd December 2019 ahead of the December roll period.
This notice is for information only.
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