Exchange-traded products (ETPs) traded on ASX include Managed Funds, Exchange-Traded Funds and Structured Products which make up the second category of quoted products that can be issued through ASX.
ETPs are typically issued under the AQUA Rules. ETFs and Managed Funds are usually classed as ‘non–market risk’ products, and as such, they can be issued by a wider range of providers.
The AQUA Rules
The AQUA Rules, Schedule 10A of the ASX Operating Rules, are based similarly on the Warrant Rules but are specifically designed for Managed Funds, Exchange-Traded Funds (ETFs) and Structured Products. These products generally do not fit easily under the Listing Rules or the Warrant Rules.
There are two ways of issuing products under the AQUA Rules: on the trading market, or through the Quote Display Board (QDB).
The trading market provides a trading platform for products quoted under the AQUA Rules. ETPs are traded in the same way that securities are traded on the equity trading market.
The QDB allows market participants to post indicative prices for products quoted under the AQUA Rules. The QDB is used where a product is not suitable for on-market trading or where the issuer does not want or need on-market trading functionality.
ETPs (other than Structured Products) are classed as non–market risk products. As such, they can be issued by:
- responsible entities of managed funds that hold a relevant Australian Financial Services License (AFSL)
- ASX-listed entities and other organisations accepted by ASX and not objected to by ASIC
Issuers eligible to issue market-risk products include:
- those named above;
- an entity which is a responsible entity of a managed investment scheme
- an entity admitted to the Official List of ASX
- an entity considered acceptable by ASX.
Product issuers should approach ASX if there is any uncertainty as to whether a product is a non–market risk product.
- ETPs must be ‘financial products’ as defined by section 764(1)(b) of the Corporations Act (Cth) and satisfy the relevant product definition under the ASX Operating Rules.
- The financial product’s value must be linked to an underlying instrument which is a financial product, index, currency, commodity or other financial instrument which may be used to continuously value the ETP.