Internal market making occurs when the issuer of an actively traded ETP makes a market for its own product or instructs a market participant to trade on its behalf.
In July 2019, ASIC requested that market operators pause the admission of new quoted funds that carry out internal market making and do not disclose their portfolio holdings daily. This was due to concerns associated with internal market makers using non-public information as part of their pricing methodology.
ASIC has concluded their review into internal market making and identified measures to manage the risks associated with this liquidity arrangement. ASIC has now requested that exchange market operators lift the pause on the admission of new managed funds with internal market making, provided that specific controls are put in place.
ASIC has said it will work with market operators and other stakeholders to ensure that new funds that are listed have compliant models and that any changes to existing models are made as soon as possible.
How we can help
The Financial Services and Funds Management team at Hamilton Locke are experienced in providing high quality advice on regulatory developments.
We would be very happy to assist you with any questions in relation to reviewing your current arrangement, managing the risks associated with internal market making, or meeting the specific requirements for admission to exchange.
Please contact our Funds and Financial Services team for more information.
