ASX Regulatory Entity

ASX Regulatory Entity

ASX is an Australian Securities exchange created by the merger of Sydney Features and Australian stock exchanges in July 2006. According to market capitalization, ASX is considered one of the top listed exchange groups in the World.

The features of ASX normally operate in globally attractive, well known and liquid Australian financial markets. The motto of ASX is to provide innovative solutions to their users. The ASX utilized modern technology to make their regulatory entity innovative, making the dealings feasible for customers. Also, it adds significant value for their stakeholders.

The ASX has several active asset classes and services. The main offering from the company are shares, debt securities, derivatives and commodities. Also, ASX allows services that include trading, settlement, clearing and listing. As a group entity, ASX maintains several owned subsidiaries with multiple functions within the group. The Australian Securities Exchange Limited are a licensed company to operate the financial market.

In contrast to this, ASX Clear, Austraclear Limited and ASX settlement Pty Limited are several entities that operate in clearing and settlement facilities. In addition, the annual report of ASX from 2020 to stakeholders confirmed that the company is enlisted in the top 10 global security exchanges in terms of values. Also, it has the largest interest rate derivatives market in Asian countries.

ASX History

The ASX initiated its first company in New South Wales’s colony as the Bank in New south wales in 1817. Nowadays, this company has become Westpac Banking Corporation Ltd.

During the 1850s, the ASX dealt with several stock exchanges in the cities, including Ballarat, Bendigo and Melbourne but these stock exchanges were not long-lived.

The ASX started its initial trading with Matthew Gregson (1928) and William Barton (1835), the Australian prime minister’s father working as a share broker.

Further, on 1st April 1987, the Australian Stock Exchange Limited was formed through incorporation under the legislation of the Australian Parliament. The procedure includes six independent stock exchanges working individually in capital cities of different states.

In 2006, Australian Stock Exchanged and Sydney Futures Exchange merged to become a single regulatory entity termed as Australian Security Exchange. As a result, it was officially named ASX Limited, and the enduring three-letter code is the most popular way of referring to the country.

ASX’s Corporations Act Obligations

The ASX has various regulatory obligations while working as a licensed operator of markets and provider of clearing and settlement facilities in Australia under the corporation Act 2001.

ASX Regulatory Entity

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Fair, orderly and transparent

As a market operator, ASX must ensure that its licensed markets are working fairly, orderly, and transparent. Further, ASX trading services are the most secure, reliable. It also provides sufficient capacity to manage reasonably foreseeable peak levels of trading.

Effectiveness

As ASX is a Clearing and settlement operator, it has to ensure that all of its licensed CS facilities have maximum effectiveness. Also, the CS operations are highly secured and reliable. Therefore, the ASX regulatory entity has established its management system that actively manages the deals by measuring defaults and other risks. These risks could be Systemic, counterparty, market, liquidity, and operational risk.

In addition to secure and reliable systems, ASX has a risk management system that appropriately deals with default and other risks, including systemic risk, counterparty risk, market risk, liquidity risk, and operational risk.

Several other regulatory obligations include managing disputes among commercial interests and its FOT and FE obligations.

ASX core functions

Australian Securities Exchange is an integrated exchange regulatory entity responsible for offering information and technical services, trading, settlement, listing, technology, post-trade services and data. In addition, it works as a payment system facilitator, market operator and clearinghouse for the financial institutions of Australia.

ASX administers the Australian financial market for various asset classes, including fixed income, energy, equities, and commodities. As a vertically integrated regulatory entity, ASX deals with primary and secondary market services such as allocation, raising and hedging of capital flows; securities settlement for fixed income and equities market: price and trading discovery; and central counterparty risk allocation. In its business operations, ASX is responsible for the following functions:

  • Trading services.
  • Listing and issuer services.
  • Equity post-trade services.
  • OTC and Derivatives markets.

ASX trading system

ASX regulatory entity has two trading systems. The ASX Trade and ASX Trade24.

ASX Trade

ASX Trade regulates the trading of Australian Services Exchange’s equity securities. So, trading of all of the equity securities under ASX regulation is undertaken on the screen of the ASX Trade platform. The ASX Trade platform is a NASDAQ OMX ultra-low latency trading platform consisting of NASDAQ OMX’s Genium INET system. Many exchanges across the World use this most functional and fastest trading platform that offers latency down to ~250 microseconds.

ASX Trade24

ASX Trade24 regulates the trading of ASX derivative securities. It is a globally known derivative securities trading platform and distributed with network gateways located in Singapore, Melbourne, New York, Sydney, Chicago, Hong Kong and New York. It monitors two active trading days and allows 24-hours trading of products.

ASX services

The services ASX provides for the regulation of the financial market are following:

  • Short selling
  • Debt securities
  • Settlement
  • Futures
  • Options

ASX potential Block-chain technology

In 2017, ASX declared itself the World’s first vertically integrated stock exchange, which launches an infrastructure around the potential blockchain technology. ASX came into existence replacing the existing clearinghouse infrastructure known as CHESS, Clearing House Electronic Subregister system. It was established to build a system rich in reliability, security and efficiency. On 27th April 2018, ASX publicized a consultation paper that provided detailed information of its new system’s target of Day 1 functional requirements, blockchain architecture, implementation plan, non-technical business requirements and connectivity options for conducting the services in coming years.

The high technical and non-functional requirements of ASX for creating an efficient system for conducting operations in the Australian’s stock exchange include:

  • Recoverability
  • Security
  • Resilience and Availability
  • Scalability
  • Performance

Bottom line

The Australian Securities Exchange is known as one of the leading financial market exchanges in the World. It ranked at fifth position in capital markets and financial systems by the World Economic Forum. In 2006, by merging two stock exchange bodies, the Australian Stock Exchange and Sydney Futures Exchange, the Australian Securities Exchange came into existence.

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