Participant
Technical Services
Credential Services
Listed Company
Professional Adviser
Information Provider
Information Services
AMO
Notice
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 of Pre-Trade Risk Management (PTRM) message rejects that can occur (the “Procedure”), effective 2 September 2019.
Subsequent market feedback has highlighted some unintended technical development consequences for participants as a result of the pending Procedure. The purpose of this Notice is to provide:
· Clarity on the conduct ASX is seeking to prevent;
· Details of a Class Waiver;
· Guidance on compliance with the Procedure; and
· Amendment to the Procedure.
Conduct ASX is seeking to prevent
The intention of the Procedure is to address the use of PTRM as an order management tool where excess messages are rejected by PTRM functionality. Not all participants have demonstrated this use of PTRM. ASX felt it was appropriate to take prompt action to address this behaviour.
Since releasing the market notice we have received significant support for addressing the issue. However, some participants have highlighted that they need to perform technical development to ensure they have real-time monitoring for compliance with the Procedure at all times. We would note that not all of these participants have demonstrated the behaviour which is targeted by the Procedure.
PTRM is an important tool provided as a part of the ASX 24 Trading Platform, delivering an additional layer of pre-trade risk management. Participants are reminded that they remain responsible for ensuring they are meeting their ASIC Market Integrity Rule obligations. PTRM may assist in meeting some but not all of the risk management requirements of the Market Integrity Rules.
ASX will shortly release a consultation paper in relation to the bond roll and seek market feedback on suggested reforms. As part of the bond roll consultation ASX will seek feedback on the effectiveness of the Procedure.
Class Waiver for No Action
ASX advises that it has granted a class waiver, with effect from 2 September 2019 and until the outcome of the bond roll consultation is determined, 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.
ASX will continue to monitor the number of PTRM message rejects from 2 September and will liaise with those participants with persistent PTRM message rejects.
Guidance on compliance with the Procedure
Question |
Response |
Which PTRM message rejects are the subject of the Procedure? |
The Account Long Net Limit and the Account Short Net Limit message rejects are those that will be reviewed. The Account Long Net Limit and Account Short Net Limit are described in the ASX Administration and Risk Terminal User Guide as amended from time to time at https://www.asx.com.au/documents/products/asx-administration-and-risk-terminal-user-guide.pdf
FIX Execution Reports for messages rejected because of a breach of the Account Long Net Limit or Account Short Net Limit will contain the following FIX tags: 103 = 3 58 = Reject due to breach of PTRM Limit on account level. |
Which PTRM message reject behaviour is being targeted? |
ASX is targeting persistent exceedance of the PTRM message reject parameters |
How does ASX define “persistent”?
|
ASX will consider that the PTRM message reject parameters (2 message rejects per second more than 5 times within one Trading Date (night and day session) or 5 message rejects per second in any single instance) are persistently exceeded where they have occurred: (a) Twice during a Roll month (March, June, September and December) where the rejects relate to Strategy Orders, or (b) Five times during any calendar month. |
Are the PTRM message rejects counted in the Pre-Open and Open Session States? |
Yes – the PTRM message rejects will be counted at all times that order entry is available. Limit Orders can be entered in the Pre-Open and Open Session States. Strategy Orders can only be entered in the Open Session State. |
Why are the PTRM message reject numbers low?
|
Given the stated purpose of PTRM, ASX expects minimal PTRM message rejects and accordingly has set parameters to reflect this.
|
Will ASX block PTRM message rejects that exceed the parameters? |
No - but any exceedance of the PTRM message reject parameters will be escalated to ASX Participants Compliance for further investigation.
|
How are PTRM message rejects per second counted? |
PTRM message rejects are aggregated within a clock second, as taken from the time stamp on the FIX Execution Report.
|
Amendment to the Procedure
To clarify the number of PTRM message rejects which will be considered a contravention of the Rules, the Procedure is amended as marked up below:
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 at or above these levels will be considered a contravention of the Rules.
Need more information?
Issued by
Fiona Tramontana
General Manager, Interest Rates
Contact information
Fiona Tramontana
+61 (02) 9227 0428
fiona.tramontana@asx.com.au