The quotation process
The range of issuers that can quote products depends on the type of product being issued.
Banks and other large, well capitalised and regulated organisations are able to list all of the products that meet the product definitions in the Rules and that ASX agrees to list. Responsible Entities (REs) of managed funds, ASX listed entities and other organisations accepted by ASX and not objected to by ASIC are able to issue a subset of the full range as detailed below under issuer ‘market-risk’ products.
Issuer 'market-risk' products
Only banks and certain other large institutions can list certain products under the Rules. ASX has defined these products as issuer ‘market-risk’ products, being those products that require the issuer to engage in risk management in respect of the product. It is appropriate that ASX limits access in this way so that investors and other market participants are protected (to the extent possible) to systemic risk or the default of an under- capitalised issuer.
A typical issuer ‘market-risk’ product is a BHP call warrant, or a instalment i.e. products that have significant optionality and the issuer would need to hedge its exposure in both the cash and ETO markets.
In general terms, institutions eligible to issue issuer 'market-risk' products must:
- Be prudentially regulated by APRA
- Be a government; or
- Have an AFSL, an investment grade credit rating, and sufficient NTA; or
- Have a guarantor that meets any of the above
The Procedures accompanying the framework specify the products that ASX considers to be issuer 'market-risk' products. Product issuers should approach ASX early if there is any uncertainty as to whether a product is an issuer 'market-risk' product. In making any decision on proposed new issuer ‘market-risk' products, ASX will consult with a panel of experts. The ASX decision on this matter will be final.
Issuer non market-risk products
Issuer non market-risk products may be issued by institutions that meet the eligibility criteria set out in Market 10A.2.1. This rule covers all other issuers including REs of managed funds and other product manufactures.
An issuer non-market risk product is any financial product where the issuer employs investor funds in a pooled fund or other mechanism to buy / fund the underlying instruments which are then held for the benefit of the investors on trust or by a registered managed investment scheme or similar vehicle. Product manufacturers should consult with ASX ahead of listing and refer to chapter 10A of the ASX Market Rules for further clarification.
Typical products include Managed Funds, ETFs and some Structured Products for example an open-ended S&P/ASX 200 ETF where the issuer has raised funds to invest in S&P/ASX 200 stock.
The quotation process
The process under the Rules is different to the process for product manufacturers under the existing Equity Rules; in fact it is similar to the Warrant Rules process and happens in two stages:
- Approval of the issuer and
- Approval of the product
The approval of the issuer only happens once, when the first product is being listed by that Issuer. Approval of the product is a separate step each time a new product is listed on ASX.
Step 1: Approval of the issuer
The product issuer or manufacturer is required to nominate an entity as the issuer of the product to be listed on ASX (for sponsored products this will be the entity that will comply with the rules*). That entity will apply to ASX to be an Approved and provide the relevant supporting documentation to demonstrate that it meets the eligibility criteria as set out in the rules. The eligibility rules for Issuers is set out in Market Rule 10A.2.1
Step 2: Approval of the product
Under the Corporations Act an issuer (or the Sponsor) is required to prepare a Prospectus or a Disclosure Statement (PDS) in respect of products issued in Australia. There are some exemptions for certain issues, but given most products listed on ASX are available for retail investors, a PDS or prospectus is likely to be required.