Enforceable Undertaking - NSXA Market Participant

Avalon Pacific Capital Pty Ltd (“Avalon Pacific Capital”) is a Market Participant of the National Stock Exchange of Australia (“NSXA”). The NSXA grants official quotation to overseas registered companies. ASIC has reviewed trading carried out by Avalon Pacific Capital and is concerned that certain orders were placed with it for the intention of creating a false and misleading appearance of the price of certain securities.

As at 30 June 2017, Avalon Pacific Capital was the largest NSXA Market Participant by value traded in 2017.

ASIC has accepted an Enforceable Undertaking from Avalon Pacific Capital. An Enforceable Undertaking is an undertaking given to ASIC by an external party which is enforceable in a court of law. They are used as an alternative to civil or administrative action where there has been a contravention of the legislation that ASIC administers.

Section 1041A of the Corporations Act 2001 (Cth) states that:

A person must not take part in, or carry out (whether directly or indirectly and whether in this jurisdiction or elsewhere):

(a)  a transaction that has or is likely to have; or

(b)  2 or more transactions that have or are likely to have;

the effect of:

(c) creating an artificial price for trading in financial products on a financial market operated in this jurisdiction; or

(d)  maintaining at a level that is artificial (whether or not it was previously artificial) a price for trading in financial products on a financial market operated in this jurisdiction.

Rule 6.6.1(b) of the ASIC Market Integrity Rules (NSXA Market) 2010 (“the NSXA Market Integrity Rules”) states that:

A Market Participant must not make a Bid or Offer for, or deal in, Securities:

On account of any other person where:

(i) The Market Participant intends to create;

(ii) The Market Participant is aware that the person intends to create; or

(iii) Taking into account the circumstances of the Order, a Market Participant ought reasonably suspect that the person has placed the Order with the intention of creating,

a false or misleading appearance of active trading in any Securities or with respect to the Market for, or the price of, any Securities.

Rule 6.6.2 of the NSXA Market Integrity Rules provides matters which Avalon Pacific Capital should have had regard to in considering the circumstances of the order, including but not limited to:

  • Whether the Order or execution of the Order would be inconsistent with the history of or recent trading in that Security.
  • Whether the Order or execution of the Order would materially alter the market for, or the price of, the Securities.
  • The time the Order is entered or any instructions concerning the time of entry of the Order;
  • Where the Order appears to be part of a series of Orders, when put together with the other Orders which appear to make up the series, the Order or the series is unusual.

In brief, Avalon Pacific Capital accepted and placed orders into the Trading Platform to trade five overseas registered companies which were listed on the NSXA (four from Samoa and one from the British Virgin Islands).

ASIC alleges that Avalon Pacific Capital should have taken into account the following considerations of the orders:

  • The orders resulted in trades that materially increased the price of each security.
  • The trades appeared to be part of a series intended to increase the price of each security.
  • The orders were provided to Avalon Pacific Capital by individuals who appear to be involved in the management of the companies.
  • Some of the orders were accompanied by unusual settlement instructions.
  • Some of the substantial price increases did not appear to be matched by company announcements that would explain the price increases and Avalon Pacific Capital made no attempts to determine if there was a legitimate commercial reason for the orders.

An agreement has been reached between ASIC and Avalon Pacific Capital which will see it:

  • Cancelling its status as an NSXA Market Participant.
  • Not reapplying for NSXA participant status.
  • Not trading NSXA listed securities, directly or indirectly. Avalon Pacific Capital will extend this prohibition to its representatives as well.


Should you have any queries about ASIC or other issues involving compliance, licensing, or corporate governance, please contact Jeremy Danon, director of Ariel & Associates Pty Ltd on (02) 8223 3355 or at jeremy@ariel.associates.