2.7.1. Direct Electronic Access

Direct Electronic Access means any arrangement, such as the use of the Member's trading code, through which a Member or the clients of that Member are able to transmit electronically orders relating to Securities, or Units in a Listed Fund, Commodity Derivatives, or Environmental Instruments directly to the facility provided by the Authorised Market Institution.

Guidance:

A Person who is permitted to have Direct Electronic Access to an Authorised Market Institution's facilities through a Member is not, by virtue of such permission, a Member of the Authorised Market Institution.

2.7.2. Direct electronic access – general conditions

An Authorised Market Institution may only permit a Member specified in AMI 2.6.1(1)(a) and (b) to provide its clients Direct Electronic Access to the Authorised Market Institution's facilities where the clients meet the suitability criteria established by the Member in order to meet the requirements in AMI 2.7.3

2.7.3. Direct electronic access – criteria, standards and arrangements

An Authorised Market Institution which permits its Members to have direct electronic access to its trading facilities or permits its Members to allow their clients to have Direct Electronic Access to its trading facilities must:

• (a) ensure that a Member allowing its clients to have direct electronic access to the trading facilities of an Authorised Market Institution is an Authorised Person;
• (b) set appropriate standards regarding risk controls and thresholds on trading through Direct Electronic Access;
• (c) be able to identify orders and trades made through Direct Electronic Access;
• (d) be able to distinguish and, if necessary, stop orders or trades made by a client using Direct Electronic Access provided by the Member without affecting the other orders or trades made or executed by that Member; and
• (e) have arrangements in place to suspend or terminate the provision of Direct Electronic Access in the case of non-compliance with this sub-paragraph.

2.7.4. Direct electronic access rules

An Authorised Market Institution operating a trading venue which permits Direct Electronic Access through it systems must set out and publish the rules and conditions pursuant to which its Members specified in AMI 2.6.1(1)(a) and (b) may provide Direct Electronic Access to their clients. Those rules and conditions must at least cover the specific requirements set out below:

• (a) A Member must retain responsibility for the orders and trades executed by the clients who are using Direct Electronic Access.
• (b) A Member must have adequate mechanisms to prevent the clients placing or executing orders using Direct Electronic Access in a manner that would result in the Member exceeding its position or margin limits.
• (c) A Member must conduct annually or on request from AFSA a due diligence assessment of its prospective Direct Electronic Access clients to ensure they meet the rules of the trading venue to which it offers access.
• (d) The due diligence assessment referred to in sub-paragraph (c) above must cover:
• (i) the governance and ownership structure of the prospective Direct Electronic Access client;
• (ii) the types of strategies to be undertaken by the prospective Direct Electronic Access client;
• (iii) the operational set-up, the systems, the pre-trade and post-trade controls and the real-time monitoring of the prospective Direct Electronic Access client;
• (iv) the responsibilities within the prospective Direct Electronic Access client for dealing with actions and errors;
• (v) the historical trading pattern and behaviour of the prospective Direct Electronic Access client;
• (vi) the level of expected trading and order volume of the prospective Direct Electronic Access client;
• (vii) the ability of the prospective Direct Electronic Access client to meet its financial obligations to the Direct Electronic Access provider; and
• (viii) the disciplinary history of the prospective Direct Electronic Access client, where available.
• (e) A Member offering Direct Electronic Access allowing clients to use third-party trading software for accessing trading venues must ensure that the software includes pre-trade controls.

The requirements in AMI 2.7 do not apply to an Authorised Crowdfunding Platform.