Australian Securities and Investments Commission
Corporations Act 2001 — Paragraph 1020F(1)(c) — Variation
Enabling legislation
1. The Australian Securities and Investments Commission makes this instrument under paragraph 1020F(1)(c) of the Corporations Act 2001 (the Act).
Title
2. This instrument is ASIC Class Order [CO 08/763].
Commencement
3. This instrument commences on the date it is registered under the Legislative Instruments Act 2003.
Note: An instrument is registered when it is recorded on the Federal Register of Legislative Instruments (FRLI) in electronic form: see Legislative Instruments Act 2003, s 4 (definition of register). The FRLI may be accessed at http://www.frli.gov.au/.
Variation
4. Notional section 1020BD of the Act as set out in paragraph 4 of ASIC Class Order [CO 08/751] is varied by omitting subsections (2) and (3) and substituting:
“Hedging by market makers
(2) Subsection (1) does not apply in relation to a sale of a security (the shorted product) or product (the shorted product) by a person where all of the following apply:
(a) the person makes a market in a financial product;
(b) the person issues or sells a financial product (the counterparty product) in the course of making that market;
(c) the person holds an Australian financial services licence covering making a market in the counterparty product or is exempt from holding such a licence for providing that financial service;
(d) the sale of the shorted product is a bona fide transaction to manage, avoid or limit the financial consequences of the person’s market making activities;
(e) the person does not know after making reasonable inquiries that the issue or sale of the counterparty product to another person (the client) in the course of making a market will result in the client establishing or increasing an economic net short position in relation to the shorted product.
Arbitrage
(3) Subsection (1) does not apply in relation to a sale of a security or product by a person as part of a dual listed arbitrage transaction.
(4) Subsection (1) does not apply in relation to a sale of a security or product by a person as part of an index arbitrage transaction.
Hedging in relation to underwriting and conversions
(5) Subsection (1) does not apply in relation to a sale of a security or product by a person for the purposes of managing, avoiding or limiting the financial consequences of:
(a) underwriting:
(i) in relation to a body—a dividend reinvestment plan or security purchase plan of the body; or
(ii) in relation to a registered scheme—a distribution reinvestment plan or interest purchase plan of the scheme; or
(b) being issued with securities or products on the conversion of a convertible security or convertible product, where the number of securities or products in that body or scheme or a related entity to be issued on conversion is referrable to the volume weighted average price of that security or product during a specified period on a financial market.
Hedging of pre-22 September 2008 exposures
(6) Subsection (1) does not apply in relation to a sale of a security or product by a person for the purposes of managing, avoiding or limiting the financial consequences of issuing, acquiring or disposing of a security or product in the same class or a derivative relating to securities or products in that class in the course of making a market, where the person issued, acquired or disposed of, or entered into an enforceable agreement to issue, acquire or dispose of, the security, product or derivative before 22 September 2008.
Interpretation
(7) In this section:
able to be traded includes (in addition to the meaning given by section 761A), in relation to a security or managed investment product and a market, traded on the market under terms by which the security or product must be transferred together with one or more other financial products.
dual listed arbitrage transaction means a purchase or sale of financial products effected in the ordinary course of trading on a financial market together with an offsetting sale or purchase of those financial products or equivalent financial products effected at the same time, or at as nearly the same time as practicable (see subsection (8)), in the ordinary course of trading on another financial market for the purpose of obtaining a profit from the difference between the prices of those financial products or those financial products and the equivalent financial products in the 2 financial markets.
equivalent financial product means:
(a) in relation to a share in a body:
(i) an interest (a depositary interest) in the share that has been issued for the purpose of enabling beneficial ownership of a share in the same class in the body to be recorded in and transferred through a clearing and settlement facility;
(ii) a share in or a depositary interest that relates to a share in another body with which the body has contractually agreed to carry on business as a single economic enterprise under terms which have the effect of giving the shares in each body as nearly as practicable the same interest in the enterprise;
(b) in relation to a managed investment product—a depositary interest that relates to the product;
(c) in relation to a depositary interest that relates to a share in a body:
(i) a share in the body;
(ii) where the body is under a contractual agreement with another body of the kind referred to in subparagraph (a)(ii)—a share in or a depositary interest that relates to a share in the other body;
(d) in relation to a depositary interest that relates to a managed investment product—the managed investment product.
exchange traded fund means a managed investment scheme or a separately managed portfolio of assets managed with the objective of investing in securities or products in a manner that tracks the performance of a particular financial market index.
index arbitrage transaction means:
(a) a sale of securities or managed investment products which are represented in a particular financial market index effected in the ordinary course of trading on a financial market and substantially in accordance with the proportion in which the securities or products are represented in the index, together with an offsetting purchase of:
(i) derivatives issued over the index; or
(ii) interests in an exchange traded fund which replicates or substantially replicates the composition of the index,
effected at the same time, or at as nearly the same time as practicable, in the ordinary course of trading on the same or another financial market for the purpose of obtaining a profit from the difference between the aggregated value of the securities or products and the value of the derivatives or interests, where the value of the offsetting purchase is equal to or greater than the aggregated value of the securities or products sold; or
(b) a purchase of securities or products which are represented in a particular financial market index effected in the ordinary course of trading on a financial market and substantially in accordance with the proportion in which the securities or products are represented in the index, together with an offsetting sale of:
(i) derivatives issued over the index; or
(ii) interests in an exchange traded fund which replicates or substantially replicates the composition of the index,
effected at the same time, or at as nearly the same time as practicable, in the ordinary course of trading on the same or another financial market for the purpose of obtaining a profit from the difference between the aggregated value of the securities or products and the value of the derivatives or interests, where the value of the offsetting sale is equal to or less than the aggregated value of the securities or products bought.
interest purchase plan means an offer of interests in a managed investment scheme under an arrangement which involves all of the following:
(a) an offer is made to each person recorded in the register of members of the scheme as a member of the scheme;
(b) each offer is made on the same terms and conditions;
(c) the issue price is less than the market price during a specified period in the 30 days prior to either the date of the offer or the date of the issue;
(d) no member may be issued with interests with an application price totalling more than $5,000 in any consecutive 12 month period;
(e) the member must provide the issuer on application for the interests with a certification to the effect that the aggregate of the application price for:
(i) the interests the subject of the application; and
(ii) any other interests in the class applied for by the member under the arrangement or any similar arrangement in the 12 months prior to the application,
does not exceed $5,000.
securities lending arrangement has the same meaning as in section 1020BC.
security purchase plan means an offer of securities in a body under an arrangement which involves all of the following:
(a) an offer is made to each person recorded in the register of members of the body as a member of the body;
(b) each offer is made on the same terms and conditions;
(c) the issue price is less than the market price during a specified period in the 30 days prior to either the date of the offer or the date of the issue;
(d) no member may be issued with securities with an application price totalling more than $5,000 in any consecutive 12 month period;
(e) the member must provide the issuer on application for the securities with a certification to the effect that the aggregate of the application price for:
(i) the securities the subject of the application; and
(ii) any other securities in the class applied for by the member under the arrangement or any similar arrangement in the 12 months prior to the application,
does not exceed $5,000.
sell has a meaning affected by subsection 1020B(7).
(8) For the avoidance doubt and without limiting the meaning of the definition of dual listed arbitrage transaction, if two financial markets are in different time zones, the purchase or sale (the first transaction) and the offsetting sale or purchase (the second transaction) is taken to have occurred at a time that is, so far as practicable, the same time if the second transaction is effected in a session of trading that:
(a) overlaps with; or
(b) occurs soonest after the close of:
the session of trading in which the first transaction was effected.”.
Dated this 23rd day of September 2008
Signed by Stephen Yen, PSM
as a delegate of the Australian Securities and Investments Commission