ASIC has introduced a two-tiered licensing regime for financial markets in its updated regulatory guidance, Regulatory Guide 172 Financial markets: Domestic and overseas operators (RG 172). The guidance has been updated following generally positive responses to consultation last year (discussed here). RG 172 has also been updated to clarify expectations in relation to technological resourcing and risk management obligations, bringing ASIC’s approach in line with regulators in foreign jurisdictions.
Under the new licensing regime, market venues can be designated as either Tier 1 or Tier 2 licensees, depending on their nature, size, complexity, and the risk that they pose to the financial system, and investor confidence and trust. Generally, Tier 1 licences are expected to cover traditional markets and significant non-exchanges while Tier 2 is targeted at specialised and emerging market venues. Tier 2 licensees will not be permitted to use the terms “exchange” or “stock/securities/futures market” in their title or marketing material. However, Tier 2 licensees will have reduced regulatory burdens to accommodate new and specialised market platforms. This is likely to impact, among others, operators of markets, operators of market-like venues (ie, those that facilitate the trading of financial products on the basis of an exclusion or exemption from the Corporations Act 2001 (Cth)) and crowd-sourced funding platforms seeking to offer secondary trading.
ASIC has indicated that market venues seeking an exemption under the new licensing regime will only be granted one in “rare and exceptional circumstances,” given the flexibility offered by the two tier system.