2.7.1. Direct Electronic Access to the facility

For the purposes of these Rules, 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 Digital Assets directly to the facility provided by the Digital Asset Trading Facility Operator and includes arrangements which involve the use by a Person of the infrastructure of the Digital Asset Trading Facility Operator or the Member or Client or any connecting system provided by the Digital Asset Trading Facility Operator or Member or Client, to transmit the orders and arrangements where such an infrastructure is not used by a Person.

Guidance:

A Person who is permitted to have Direct Electronic Access to a Digital Asset Trading Facility Operator's facility through a Member is not, by virtue of such permission, a Member of the Digital Asset Trading Facility Operator.

2.7.2. Permitting Members that are Body Corporates to provide Direct Electronic Access to Clients

(1) This rule applies if a Digital Asset Trading Facility Operator proposes to permit a Member that is a Body Corporate to provide its Clients Direct Electronic Access to the Digital Asset Trading Facility Operator’s facility.

(2) A Digital Asset Trading Facility Operator may permit a Member to provide its Clients Direct Electronic Access to the Digital Asset Trading Facility Operator’s facility only if:

(a) the Clients meet the suitability criteria established by the Member in order to meet the requirements in DAA 2.7.3;

(b) the Member retains responsibility for the orders and trades executed by its Clients who are using Direct Electronic Access; and

(c) the Member has adequate mechanisms to prevent its Clients placing or executing orders using Direct Electronic Access in a manner that would result in the Member exceeding its position or margin limits.

2.7.3. Criteria, standards and arrangements for providing Direct Electronic Access to Clients of Members that are Body Corporates

(1) A Digital Asset Trading Facility Operator which permits its Members to provide its Clients Direct Electronic Access to the Digital Asset Trading Facility Operator’s facility under DAA 2.7.2. must:

(a) set appropriate standards regarding risk controls and thresholds on trading through Direct Electronic Access;

(b) be able to identify orders and trades made through Direct Electronic Access; and

(c) if necessary, be able to 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.

(2) A Client who is permitted to have Direct Electronic Access to a Digital Asset Trading Facility Operator’s facility through a Member is not, by virtue of such permission, a Member of the Digital Asset Trading Facility Operator. However, such Client is subject to the jurisdiction of the Digital Asset Trading Facility Operator.

(3) In determining whether a Digital Asset Trading Facility Operator has adequate arrangements to permit Direct Electronic Access to its facility and to prevent and resolve problems likely to arise from the use of electronic systems to provide indirect access to its facility to Persons other than the Digital Asset Trading Facility Operator’s Members, the AFSA may have regard to:

(a) the rules and guidance governing Members’ procedures, controls and security arrangements for inputting instructions into the system;

(b) the rules and guidance governing the facilities that Members provide to their Clients to input instructions into the system and the restrictions placed on the use of those systems;

(c) the rules and practices to detect, identify, and halt or remove instructions breaching any relevant restrictions;

(d) the quality and completeness of the audit trail of a transaction processed through an electronic connection system;

(e) the systems and controls in place to monitor compliance with applicable law and regulation, cybersecurity requirements, as well as prevention of money laundering, Market Abuse and other Financial Crime; and

(f) the procedures in place to determine whether to suspend trading by Direct Electronic Access systems generally or access to those systems by or through individual Members.

2.7.4. Criteria, standards and arrangements for giving Direct Electronic Access to Members who are individuals (natural persons)

(1) This rule applies if a Digital Asset Trading Facility Operator proposes to give to a Member who is an individual (natural person) Direct Electronic Access to the Digital Asset Trading Facility Operator’s facility.

(2) A Digital Asset Trading Facility Operator must ensure that:

(a) its rules clearly set out:

(i) the duties owed by the Digital Asset Trading Facility Operator to its Members with Direct Electronic Access, and how the Digital Asset Trading Facility Operator is held accountable for any failure to fulfil those duties; and

(ii) the duties owed by the Members with Direct Electronic Access to the Digital Asset Trading Facility Operator and how such Members are held accountable for any failure to fulfil those duties;

(b) appropriate investor redress mechanisms are available, in accordance with COB Chapter 15, and disclosed to Members permitted to trade Digital Assets on its facility; and

(c) its facility contains a prominent disclosure of the risks associated with trading and clearing Digital Assets.

(3) Without limiting the generality of the systems and controls obligations of the Digital Asset Trading Facility Operator, the Digital Asset Trading Facility Operator must have adequate systems and controls to address market integrity, AML and CTF, and investor protection risks in giving Direct Electronic Access to a Member, to trade on its facility, including procedures to:

(a) ensure that appropriate customer due diligence sufficient to address AML and CTF risks has been conducted on each Member, before permitting the Member to trade on its facility, and that such due diligence is updated periodically on an ongoing basis, and at least quarterly, after the establishment of relations with a Member;

(b) detect and address potential market manipulation and abuse; and

(c) ensure that there is adequate disclosure relating to the Digital Assets that are traded on the facility, including as regards any particular risks in relation to such. 

(4) A Digital Asset Trading Facility Operator must maintain written policies and procedures to evidence compliance with the requirements of DAA 2.7.4(3).

(5) A Digital Asset Trading Facility Operator must have adequate controls and procedures to ensure that trading Digital Assets by Members with Direct Electronic Access does not pose any risks to the orderly and efficient functioning of the facility’s trading system, including controls and procedures to:

(a) mitigate counterparty risks that may arise from defaults by such Members through adequate collateral management measures, such as margin requirements, based on the settlement cycle adopted by the Digital Asset Trading Facility Operator;

(b) identify and distinguish orders that are placed by such Members, and, if necessary, enable the Digital Asset Trading Facility Operator to stop orders of, or trading by, such Members;

(c) prevent such Members from allowing access to unauthorised Persons to trade on the trading facility; and

(d) ensure that such Members fully comply with the rules of the facility and promptly address any gaps and deficiencies that are identified.

(6) A Digital Asset Trading Facility Operator must have adequate resources and systems to carry out frontline monitoring of the trading activities of Members with Direct Electronic Access.