Publications / Corporate Advisory
Following the release, in October 2012, of proposed changes to the guidelines for interpretation of continuous disclosure provisions in the Listing Rules, ASX released a Final Guidance Note on March 13, 2013. Reece Walker, Partner in our Corporate Advisory Group, outlines the changes and also summarises ASX timetable for fast-track listing applications for IPOs, ASIC’s report into dark liquidity and high-frequency trading, and the new obligations on companies under the Workplace Gender Equality Act 2012 (Cth) (the Act).
ASX is providing listed entities with clearer, more detailed information to help them understand and comply with their continuous disclosure obligations. Following the Review of ASX Listing Rules Guidance Note 8, the Consultation Response was released on 13 March, together with the final versions of:
- Guidance Note 8: Continuous Disclosure: Listing Rules 3.1 – 3.1B
- Continuous Disclosure: An Abridged Guide, and
- disclosure-related amendments to the ASX Listing Rules (in clean and mark-up format).
In response to feedback gathered during the consultations, ASX upgraded Guidance Note 8 in a number of key areas, including:
- what ASX means by the word 'delay' when it defines 'immediately' as 'promptly and without delay'
- when an entity should ask for a trading halt to manage its continuous disclosure obligations
- when ASX treats media and analyst reports and market rumours as evidencing a loss of confidentiality under Listing Rule 3.1A.2
- the operation of the 'reasonable person' test in Listing Rule 3.1A.3
- ASX’ expectations around the monitoring of social media, and
- the disclosure of earnings surprises, including the role played by consensus estimates in setting market expectations for earnings.
ASX has also made a number of amendments to the proposed disclosure-related Listing Rule changes. The revised version of Guidance Note 8 will be published and come into effect on or around 1 May 2013.
ASX is also releasing updated versions of the following Listing Rule Guidance Notes:
- Guidance Note 1 Applying for Admission – ASX Listings
- Guidance Note 4 Foreign Entities Listing on ASX
- Guidance Note 12 Significant Changes to Activities
- Guidance Note 16 Trading Halts and Voluntary Suspensions, and
- Guidance Note 17 Waivers and In-Principle Advice.
These Guidance Notes are being updated to be consistent with the new version of Guidance Note 8 and the disclosure-related Listing Rule changes. They will also come into operation on 1 May 2013. ASX has flagged a national roadshow to inform listed companies of the changes.
ASX has formalised its timetable for fast-track listing applications for IPOs using a pathfinder prospectus or PDS (Guidance Note 1). ASX may agree to review a company’s draft listing application and complete most of the work involved in assessing the application before the company formally lodges its final prospectus or PDS with ASIC.If ASX agrees to the fast-track process, the new process will be:
- eight weeks before the lodgment of a prospectus or PDS with ASIC the company must lodge any applications for in-principle advice on the Listing Rules with ASX
- four weeks prior to lodgment of a prospectus or PDS the company must lodge a pathfinder prospectus or PDS and draft Appendix 1A (including accompanying documents) with ASX
- if the company is proposing to seek waivers from any Listing Rules in connection with its listing, it must also lodge formal waiver applications
- at the time of lodgment of the prospectus or PDS with ASIC, the company must provide ASX with:
- a copy of the final prospectus or PDS
- final Appendix 1A and accompanying documents, and
- a mark-up of these documents showing any changes which have been made since they were initially lodged with ASX.
- if no changes were made, written confirmation of this fact must be given to ASX, and
- two weeks after lodgment of the prospectus or PDS and application for listing, quotation of securities occurs.
The fast-track timetable will only apply in instances where no material changes were made to the documents originally given to ASX.
A new information form and checklist has also been introduced that must accompany an Appendix 1A listing application, together with all of the information and documents referred to in it.
On Monday 18 March 2013, ASIC released a report and a consultation paper that examine the impact of dark liquidity and high-frequency trading (HFT) on Australia’s financial markets. The package is the result of analysis by two internal ASIC taskforces. The dark liquidity taskforce was set up in response to concerns about its impact on market efficiency and quality and the HFT taskforce addressed concerns about disorderliness and unfairness.
The report and consultation paper focus on the quality of the market for capital raising and long term investment and thus Australia’s competitiveness as a regional financial centre.
In summary, ASIC found that public concerns over HFT have been overstated and may be attributed to the increasing use of trading technology by investors generally.
The taskforce did not find systematic manipulation or abuse of markets by high frequency traders, however, it found that their trading strategies are commonly adopted by many other algorithmic traders, including institutions.
ASIC reported a marked change in the behaviour of professional traders during the course of the study and has determined that many of the issues raised can be dealt with by existing regulations.
They found that high-frequency trading in Australia is dominated by a small group of trading entities with the 20 largest entities accounting for about 80% of all HFT turnover (or 22% of total equity market turnover). Also, order-to-trade ratios in Australia are moderate compared to overseas markets and the average holding time is 42 minutes. Most traders, whether high-frequency traders or not, had order-to-trade ratios below 4:1. The market average is approximately 10:1.
The taskforce found that while the volume of dark trading has remained around 25-30%, the composition of dark liquidity and market participant-operated dark venues (crossing systems) has changed significantly. There are now 20 crossing systems operated by 16 market participants and they have started to connect to one another.
The ASIC study found that dark trading is now occurring in smaller sizes that are similar to ‘lit’ exchange markets, influencing the price of some securities. They report that some practices were uncovered that will require further controls and have indicated an intention to fill some regulatory gaps, however these gaps are not as yet specified.
Both taskforces found potential breaches of Market Integrity Rules and the Corporations Act, and some matters are being investigated. Broadly, the taskforces’ recommendations relate to:
- safeguarding against dark liquidity negatively impacting prices
- improved disclosure and supervision of dark trading, and
- restrictions on small, fleeting orders.
The Workplace Gender Equality Act 2012 (Cth) (the Act) was assented to on 6 December 2012 and will be phased in over the next two years. The Act makes significant changes to the gender equality reporting requirements for private sector employers with more than 100 employees.
The Act introduces new reporting obligations against a set of standardised ‘gender equality indicators’, defined as:
- gender composition of the workforce
- gender composition of governing bodies of relevant employers
- equal remuneration between women and men
- availability and utility of employment terms, conditions and practices relating to flexible working arrangements for employees and to working arrangements supporting employees with family or caring responsibilities
- consultation with employees on issues concerning gender equality in the workplace, and
- any other matters specified by the Minister in a legislative instrument.
This means companies must indicate in their 2013 Annual Report where shareholders can find this information. The requirements are additional to ASX Diversity Policy requirements, although there will be a degree of crossover in the setting and monitoring of diversity key performance indicators (KPIs).
The Workplace Gender Equality Agency (formerly the Equal Opportunity for Women in the Workplace agency) also has the power to ‘name and shame’ non-compliant employers by publishing the employer’s name and the details of their non-compliance in reports, print media and online.
This Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.