The Assistant Treasurer, Senator Rod Kemp, today announced the approval of the Australian Derivatives Exchange Ltd (ADX) as a futures market under the Corporations Law. Senator Kemp’s approval follows an intensive assessment process by the Australian Securities and Investments Commission of ADX’s application which included its referral for public consultation for six weeks from September to October this year.
The ADX will begin its operations with three contracts available for trading by participants of the exchange. These are its three months interest rate futures contract, five year bond futures contract and Australian equity index futures contract (the MSCI Aussie Index).
The approval of the ADX is a significant step towards strengthening Australia’s reputation in international markets. Through the strategic alliances being pursued by the ADX, its presence in the global market will be enhanced. It will bring a degree of competition into our futures industry and its approval is consistent with the Government’s vision of promoting Australia as a global financial centre.
The Government is keen to provide start-up markets with the opportunity to position themselves within Australia and overseas. It is important, however, that we ensure our markets are secure and that we maintain market integrity. In recognition of the start-up nature of the ADX, it has entered into a deed with ASIC containing a range of undertakings to secure these goals. A summary of the agreement is in the attachment.
Complementing the ADX approval, the Options Clearing House (OCH) has been approved as the clearing and settlement facility for the ADX.
The Government also supports ASIC’s moves to secure a number of information-sharing agreements aimed at maintaining Australia’s high market standards. It is expected that these agreements - between the ADX and the Sydney Futures Exchange Ltd and also between the Options Clearing House Pty Ltd and the Sydney Futures Exchange Clearing House Pty Ltd - will be in place within 30 days of approval of ADX’s and OCH’s applications.
MELBOURNE
12 December 2000
Media contacts: Richard Allsop Assistant Treasurer’s Office (03) 9650 7274
Nigel Ray Department of Treasury (02) 6263 3974
ATTACHMENT TO PRESS RELEASE
Summary of Deed between the Australian Derivatives Exchange Ltd and the Australian Securities and Investments Commission
In the deed, ADX covenants with ASIC to:
- ensure that ADX has, or has access to, sufficient financial resources to meet ongoing cash requirements for the conduct of its futures market for a minimum of three months at any time (excluding any revenue generated by ADX in its first year of operation);
- notify ASIC when it is in breach of its financial reporting obligations in point 1 above;
- where the breach remains or is anticipated to be unremedied for 30 days, request the Minister to revoke its approval to conduct a futures market;
- comply with undertakings concerning:
- the conduct of its futures market generally to ensure it operates in a fair and orderly and transparent way;
- in this regard, ADX must ensure it maintains at all times the appropriate infrastructure to conduct its supervisory, investigatory and disciplinary functions;
- its clearing and settlement facility arrangements and, before the commencement of trading on its futures exchange, the finalisation of a clearing guarantee;
- the finalisation of its fidelity fund arrangements before the commencement of trading on its futures exchange;
- ASIC’s access to ADX documents for auditing or other purposes;
- ADX’s financial reporting obligations;
- ADX’s constitution with regard to shareholding limits and the eligibility of directors and senior executive employees;
- ADX’s entry into Memoranda of Understanding with ASIC to ensure the smooth working of supervisory and compliance arrangements by ADX; and
- ADX’s entry into appropriate inter-market information-sharing arrangements with other market operators within 30 days of ADX’s approval by the Minister as a futures exchange.
- the conduct of its futures market generally to ensure it operates in a fair and orderly and transparent way;