ETF issuers may use foreign market makers

Issuers of exchange-traded funds (ETFs) can now use foreign market makers as the Australian Securities and Investments Commission (ASIC) has updated its class order.

ASIC does ASIC Corporations (Amendment) Instrument 2021/299 (Amending Instrument) to modify the collective prescription 13/721 [CO 13/721] (Class Order), which removed the requirement in the Class Order that an authorized participant must be an Australian resident for tax purposes.

The amendment instrument removed a regulatory barrier to entry for offshore market making entities seeking to participate in the Australian ETF market, which the corporate regulator believes could encourage new entrants to the industry. ETF market making.

ASIC developed the amendment instrument after reviewing the requirement for local authorized participants and consulting with interested stakeholders.

It found that the local authorized participant requirement did not support competition or market efficiency in the ETF market making industry and that the requirement may lead to sub-optimal results for investors in ETFs. retail trading in the secondary market, in particular due to wider buy-sell spreads than one would expect in a more competitive market.

ASIC consulted with a number of ETF issuers and market makers, as well as the Australian Tax Office, in connection with the review.


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