Financial Services Reform Act Transition And ASX Group Structure

Australian Stock Exchange Limited (ASX) is pleased to announce completion of its transition to the Financial Services Reform Act (FSRA) regime with the grant today of a varied market operator licence for ASX, and varied clearing and settlement facility licences for Australian Clearing House Pty Limited (ACH) and ASX Settlement and Transfer Corporation Pty Limited (ASTC).

Announcing this, the Managing Director and CEO of ASX, Mr Richard Humphry commented that as well as ensuring ASX's compliance with the new regulatory regime, ASX has used the opportunity presented by FSRA to streamline and improve its group structure from which trading, clearing and settlement services are offered.

"In broad terms, we are moving from a product-based structure to a functionally based structure. We believe the new structure will contribute to the long term integrity, efficiency and growth of Australia's financial markets," Mr Humphry said.

Under the new licence and group entity structure all asset classes have been consolidated under separately licensed entities responsible for market, clearing and settlement. The result is that:

• ASX's market and the market of ASX Futures Exchange Pty Limited (ASXF) have been consolidated so that ASX is the sole market operator providing all trading services. ASXF ceases to hold a market licence;
• ACH, formerly Options Clearing House Pty Ltd, today commences operation as the central counterparty and clearing facility for all markets, providing all clearing and counterparty risk management services; and
• ASTC is the settlement processing facility for all markets and so provides all settlement and asset registration services.

In addition to each entity being separately licensed to carry on its functions, each will also have its own Rulebook, which applies to all products and assets in relation to which services are offered. As a result, the existing ASX Business Rules, ASXF Business Rules, OCH Derivatives Clearing Rules and SCH Business Rules have been rationalised and new rules come into effect today, as follows:

• ASX Market Rules, covering access to trading facilities and the conduct of market participants;
• ACH Clearing Rules, covering the responsibility for counterparty risk for market transactions and access to clearing facilities and conduct of clearing participants; and
• ASTC Settlement Rules, covering access to settlement infrastructure for the purpose of payment, delivery and asset registration and conduct of settlement participants.

This rationalisation creates a significantly improved framework for the rules. Where policy changes were necessary as part of the revised framework, they were the subject of an industry consultation process. Details can be found in a Key Issues paper ASX issued in October 2003, which is on the ASX website at www.asx.com.au/markets/pdf/KeyIssuesPaperFinal.pdf .

"ASX appreciates the substantial efforts required by Participants to transition under the new structures and we congratulate them on their efforts to date," Mr Humphry said.