The Australian Securities and Investments Commission has made new market integrity rules for suspicious activity reporting and short sale tagging requirements which will apply for the Australian Securities Exchange (ASX) and Chi-X markets.

The Australian Securities and Investments Commission has made new market integrity rules for suspicious activity reporting and short sale tagging requirements which will apply for the Australian Securities Exchange (ASX) and Chi-X markets.

The suspicious activity reporting rule has a stated commencement date of 1 November 2012, but consistent with ASIC’s commitment to provide industry with a six-month implementation period to allow it to adapt systems and processes, ASIC will waive the obligation to comply with the rule until 20 January 2013.

The obligation will require participants of the ASX and Chi-X markets to notify ASIC when they become aware, in the course of their business activities and in the course of complying with existing obligations, of certain suspicious trading activity.

Greg Yanco, senior executive leader of market and participant supervision, says: “ASIC expects that the rule will result in an increased number of useful reports by market participants of potential misconduct. ASIC also expects that these reports may be received at an earlier stage than currently which will, in turn, facilitate early identification by ASIC of possible misconduct.”

The short sale tagging obligation will commence on 1 March 2014 and will require market participants to specify, at the time an order is placed, the quantity of a sell order that is a short sale. For on order book transactions, this will require specification of the number of products that are short at the time the order is placed into the market. For off order book transactions, the number of products that are short will need to be provided in the trade report provided to a market operator.

To assist market operators better understand the operation of the rules and how to comply with them, ASIC has released Regulatory Guide 238 Suspicious activity reporting (RG 238) and Information Sheet 158 Short sale tagging (INFO 158).

Yanco says the rules bring the Australian market in line with international best practice and reinforce ASIC’s strategic priority of maintaining fair and efficient financial markets.