Market Operator Software – Pre-Trade Risk Management Software Use

What's this about:
  • ASX 24 Market
  • Trading
  • Clearing
  • Product
  • Operations
  • Technology
  • Rules
  • Compliance
  • Risk
  • Equity Derivatives
  • Commodities
  • Interest Rate Futures
  • Rates
  • PTRM
  • message rejects
  • order rejects
  • order management
Notice reference number: 0738.19.07
Date published: 24/07/19
Effective as of: 02/09/19
Last updated: 24/07/19

ASX is changing the Conditions of Licence for Market Operator Software contained in the ASX 24 Operating Rules and Procedures to limit the number of Pre-Trade Risk Management (PTRM) rejects that can occur. The change is being made to ensure that the functionality provided by PTRM is used for its intended purpose.

ASX’s PTRM system is specifically provided as part of the ASX 24 Trading Platform for the management of pre-trade risk limits.  PTRM is designed as a second layer of risk management and Participants are required to have in place their own risk management systems.  Consequently, ASX expects levels of PTRM rejects to be very low.

ASX has identified some behaviour where the use of PTRM was inconsistent with this expectation.  

ASX 24 Participants are advised of a change to the Conditions of Licence for Market Operator Software contained in the ASX 24 Operating Rules and Procedures.  These changes reinforce the risk management framework of PTRM and provide a method to measure behaviour.

If these changes do not result in the desired outcome ASX will take additional measures to ensure that PTRM use remains consistent with its intended purpose.

The relevant procedure is detailed below with the additional conditions shown in mark-up:

1700.1   Licence Over Market Operator Software

 (a)         Grant of Licence

              By meeting and continuing to meet the conditions set out in the Rules, a Participant is granted by the Market Operator and continues to hold, a non-transferable, non-exclusive Licence to use such part of the Market Operator Software as is approved by the Market Operator.

 (b)         Conditions of Licence

              The conditions of a Licence granted to a Participant under Rule [1700] are that the Participant must:

(xxv)  not permit at a Participant level, in relation to the pre-trade risk management (PTRM) Licenced Software:

(a)   2 message rejects per second more than 5 times within one Trading Date (night and day session), or

(b)   5 message rejects per second in any single instance.

Any message rejects above these levels will be considered a contravention of the Rules.

Participants are also reminded that they remain responsible for ensuring they are meeting their Market Integrity Rules (MIR) obligations.

MIR obligations are mandatory. Where we offer some functionality that may assist a user in meeting some of their MIR obligations, it is still the ultimate responsibility of the user to ensure they meet their MIR obligations.

Some of the limit setting capability within PTRM should meet some but not all of the limit requirements of s2.2.1 of the ASIC Market Integrity Rules (Futures Markets) 2017. Users are advised to check that they are meeting all of the MIR requirements.

ASX will continue to monitor effectiveness of the message reject levels and amend if required.  Participants should note that a breach of ASX 24 Operating Rule 1700 is considered a serious breach.

What do I need to do by when?

Participants should ensure that their risk management systems have appropriate risk limits in place such that the PTRM functionality provided by ASX is used as the second layer of risk management.

Need more information?

Issued by

Ben Jackson

General Manager, Trading Operations

Contact information

Trading Operations
+61(02)  9256 0677, 1300 655 560