ASIC has encouraged participants in wholesale financial markets to benchmark themselves against ‘better and poorer’ practices outlined by the regulator in two new reports.
The reports summarise ASIC’s surveillance activities and complement existing regulatory guidance from the corporate regulator by providing examples of practices it has observed.
“Wholesale financial markets, including fixed-income, currencies, and commodities markets, are global, complex, and rapidly evolving,” said ASIC commissioner Danielle Press.
“Because these markets underpin growth in Australia’s real economy by providing financing to governments, financial institutions and corporates, misconduct can have wide-reaching impacts. As such, we have increased our focus on the conduct of participants in this sector.”
After conducting a thematic ‘deep dive’ review of five large Australian financial services licensees between 2019 and 2022, ASIC identified what it considers to be better and poorer practices when managing conflicts of interest in wholesale financial markets in Report 742 Managing conflicts of interest in wholesale financial markets (REP 742).
According to ASIC, better practices involved proactive and systematic identification, mitigation, and management of conflicts of interest, while poorer practices were ad hoc, manual, and reflected a lack of prioritisation by participants.
Over the same time period, ASIC also reviewed how nine significant dealers in Australian fixed-income markets managed key conduct risks including misleading or deceptive conduct, insider trading and market manipulation.
Better and poorer practices observed in the management of these risks have been published by ASIC in the REP 742.
While some participants were found to have comprehensive monitoring and surveillance functions, ASIC said that others had gaps in some trading activity and communication channels.
“Participants in wholesale financial markets should consider how they compare with these better and poorer practices,” said Ms Press.
“High standards of conduct and oversight, such as the better practices in the reports, strengthen market integrity and confidence in Australia’s wholesale financial markets.”
