The Australian Stock Exchange (ASX) has amended its operating rules to enhance disclosure requirements and facilitate the expansion of non-conventional warrants, structured products, managed funds and exchange-traded funds (ETFs) on its ASX Aqua trading market.
The amendments include a number of regulatory-type amendments that have been approved by the Australian Securities and Investment Commission (Asic), and are aimed at supporting the facilitation and growth of the quotation, trading, clearing and settlement of warrants, exchange-traded funds, managed funds and structured products.
The amendments include enhanced disclosure requirements for issuers; additional requirements for products deemed to be synthetic to including maximum percentage of exposure to a counterparty, counterparty quality and collateral quality; new naming conventions and index selection principles; and the expansion of the definitions of ETFs and managed funds.
In relation to structured products, issuers are now required to lodge their annual report and statement of assets, liabilities and shareholders’ equity with the ASX, as well as disclosing whether the underlying instrument of a product is an index and information in relation to the index; as well as any distribution or dividend statements (or other distribution or dividend information) that are made available or provided to holders of the structured products.
The exchange is also introducing a new concept of fully-covered Aqua products and expanding the existing concept of fully-covered warrants and has also removed the exchange’s consent role for changes to the terms of issue of warrants and structured products, expressly providing for revocation of admission at the request of the issuer.
The amendments to the definitions of ETFs and managed funds are also formalised in the rules, with waivers that have previously been granted to enable international ETFs to be quoted on ASX and facilitate underlying instruments other than World Federation of Exchanges’ (WFE) traded securities in respect of the application and redemption process.
Issuers of synthetic ETFs and managed funds relying on OTC derivatives to replicate the performance of an underlying must ensure that the aggregate exposure to OTC derivative counterparties does not exceed 10% of the net asset value of the ETF/managed fund; the counterparties to the OTC derivatives fall within certain qualifying categories; and that any assets which may be obtained by the ETF/managed fund as collateral under an OTC derivative are clearly disclosed.
These issuers will also be required to publicly disclose the aggregate exposure of the ETF or managed fund from OTC derivatives and the value of assets held by the ETF or managed fund, each as a percentage of the net asset value of the ETF or managed fund; and ensure that OTC derivative collateral is held by the ETF or managed fund, or on its behalf subject to immediate delivery on call.
As a result of the new rules, issuers of ETFs, managed funds and structured products on ASX Aqua will need to revisit their protocols and procedures for disclosure to the market and to the ASX; and will need to determine whether their products are regarded as synthetic products, which are subject to new rules imposing requirements on exposures, counterparties and disclosures, stated the exchange.
In addition, US foreign companies can now be admitted on ASX Aqua following the expansion of the definitions of ‘ETF’ and ‘managed fund’.
Click in the link to read the ASX Notice 0353.15.04
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