Licensing, regulation and supervision of financial markets is dealt with in Pt 7.2 and Pt 7.2A of the Corporations Act 2001 (Cth). Div 5 of Pt 7.1 explains the meaning of the term “financial market”.

See Financial market.

Pt 7.4 is also relevant to this area because it imposes certain limits on involvement with market operators who are licensed to operate financial markets in Australia.

There are a number of ASIC Regulatory Guides which are relevant to licensing, regulation and supervision of financial markets and these should be read in conjunction with the relevant provisions of Ch 7 .

Pt 7.2 deals with licensing and regulation of financial markets.

Unless exempted, to operate a financial market in Australia, a person must have an Australian market licence granted by the Minister that authorizes the person to operate the market in Australia. On 22 April 2016, the responsible Minister delegated her power to issue Australian market licences to ASIC.

Where a person holds an Australian market licence, they may also provide financial services incidental to the operation of the market. Div 4 of Pt 7.1 explains the meaning of when a person provides a “financial service”

See Financial service.

A number of domestic and overseas financial markets have been licensed to operate in Australia. The most significant licensed financial markets in Australia are operated by the ASX Group which is the brand name for ASX Limited and its licensed operating subsidiaries.

See Licensing of financial markets.

Pt 7.2 imposes on market licensees:

• a number of general obligations; and

• a number of specific obligations.

Market licensees must comply with these obligations and the Minister and ASIC have powers conferred on them to promote compliance with the licensee obligations. On 22 April 2016, the Minister’s powers to promote compliance were delegated to ASIC.

See Obligations of market licensees.

Pt 7.2 regulates licensed domestic financial markets by requiring that:

• the operating rules (which include the market's listing rules (if any)) of a licensed market contain certain matters; and

• licensed markets have written procedures in respect of certain matters.

These requirements do not apply to a holder of a licence granted for an overseas market to operate in Australia but nevertheless ASIC takes the view that the operating rules for such a market should generally contain the same kinds of matters required to be contained in the operating rules of a licensed domestic market.

Any changes to the operating rules of a licensed domestic market are subject to Ministerial disallowance. On 22 April 2016, the power of disallowance was delegated to ASIC. Disallowance does not apply to changes made by a holder of a licence granted for an overseas market.

If the operating rules are not complied with, ASIC and certain other specified entities may apply to the Court to enforce the operating rules.

See Operating rules and procedures of financial markets.

Pt 7.2 sets out how a person can apply for an Australian market licence and the criteria for granting a licence. The criteria for granting a licence differs according to whether the market is:

• a domestic market; or

• an overseas market.

The Minister has power to:

• impose conditions or additional conditions on an Australian market licence or vary or revoke conditions imposed on such a licence; and

• vary, suspend or cancel a licence.

On 22 April 2016, these powers were delegated to ASIC.

Subject to certain restrictions and protections, a domestic market licensee and certain specified entities:

• may be included in the market's official list; and

• may be a participant in a market.

See Applying for the Australian market licence.

Pt 7.2A deals with supervision of financial markets. ASIC has responsibility for supervising trading on licensed domestic markets. It does not have responsibility for supervising:

• markets operated by a person who holds a licence granted for an overseas market; and

• markets that are exempt from being licensed.

Licensed domestic markets and participants in these markets are subject to rules known as "market integrity rules" made by ASIC and must comply with those rules. ASIC has made a number of market integrity rules.

Operators of licensed domestic markets, participants in such licensed markets and any other prescribed entities must comply with the market integrity rules. There is a regime in place to deal with any breaches of the market integrity rules.

See Supervision of financial markets.

Pt 7.4 imposes certain limits on involvement with market licensees:

• There are limits on control of certain market licensees and other bodies corporate which are “widely held market bodies” in order to avoid an “unacceptable control situation” existing in relation to such bodies. Generally, there is an “unacceptable control situation” if a person’s voting power in a widely held market body exceeds 15%. A person may apply for approval to have voting power of more than 15% in a particular widely held market body (other than ASX Limited).

• There is provision for disqualification of an individual involved in a market licensee who is not fit and proper to be involved in a market licensee. An individual is “involved in” a market licensee or an applicant for such a licence if:

See Limits on involvement with licensees.