ASX has launched a new service that enables investors to buy and sell units in selected unlisted managed funds via the same advisory services they might use to transact shares or other ASX products.
The service uses CHESS, ASX's world-class electronic settlement system, to automate and track the process of buying (applying for) and selling (redeeming) units in these managed funds. Investor's holdings in these funds ('mFunds CHESS holdings') are held electronically and linked to the same Holder Identification Number (HIN) used to hold other investments transacted through ASX, such as shares. That means investors can track managed fund investments using the same systems they use for shares and other securities they transact through ASX.
mFund products are issued under Schedule 10A of the ASX Operating Rules, the AQUA Rules, and fall under the definition of 'Managed Fund Products' in these rules. Managed Fund Products are 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 are based on the Warrant Rules but are specifically designed for Managed Funds, Exchange-Traded Funds (ETFs) and Structured Products. These products do not fit easily under the Listing Rules or the Warrant Rules. For more information about the rule differences, see the ASX Rules framework.
There are three ways of issuing products under the AQUA Rules: on the trading market, through the Quote Display Board (QDB) or through the mFund Settlement Service.
All mFund products are unlisted and unquoted managed funds which means they are not directly traded on ASX. Instead, purchases and sales of units in the fund are made between the investor and the managed fund Issuer's unit registry. Investors do not trade mFund units with other investor. The price of units is set by the fund manager and not on a traded market, as is the case in ETF transactions.
Managed Fund Products are classified as non-market risk products. As such they can by 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
Managed Fund Products 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.
Managed Fund Products which are issued or provide pursuant to a 'simple managed investment scheme' (as defined in the Corporations Regulations) in relation to which the issuer provides disclosure in the form of a shorter PDS in accordance with Part 7.9 Division4, Subdivision 4.2C of the Corporations Regulations.
Product Issuer Settlement Participant
The mFund Settlement Service involves primary market transactions only. As such ASX has created a new settlement participant to interface directly with AQUA Product Issuers, the Product Issuer Settlement Participant ("PISP").
An AQUA Product Issuer of mFund products is required to appoint a PISP in order to interface directly with CHESS to accept and settle transactions of mFund Products. Each PISP is required to establish separate redemption and payment facilities per AQUA Product Issuer.