Section 15 - Primary market facility

Section 15 - Primary market facility

15.1 - Primary Market Facility Overview

The primary market facility (PMF) is a service available to issuers of approved financial products and their appointed settlement agents. The PMF supports the settlement and transfer of interests in a security offered as part of a primary or secondary capital raising on a Delivery versus Payment (DvP) basis (refer to section 9.1.1).

The instrument used to support the processing of allocation components for an offer of securities is called an ‘Allocation Interest’ and its use is regulated by Section 15 – ‘DvP Settlement of Allocations in Respect of Initial Public Offerings’ under the ASX Settlement Operating Rules and Procedures.

Allocation components typically supported by the PMF include both primary and secondary offers made to institutions (e.g. placements, institutional book builds and entitlement offers) and components of an Initial Public Offering made directly or generally to retail and institutional investors.

This section does not cover the procedures pertaining to placements that are settled outside of CHESS.

An issuer may request that only certain components of an offer be settled using the PMF and the inclusion of one allocation component does not preclude another component of the offer from also being settled using allocation interests.

An allocation interest is not a ‘security’ for the purposes of the Corporations Act and PMF transactions are not covered by the National Guarantee Fund (NGF). Applicants are required to demonstrate to ASX Settlement how parties to a non-NGF transaction understand that if there was a default, the non-defaulting party would not be able to rely on the NGF for completion of the transaction.

To enable the issuer to fulfil the CHESS operational requirements as outlined in this section the issuer must either:

  • appoint an agent to act on its behalf; or

  • be admitted as a participant.

Refer to ASX Settlement Operating Rule 15.3 for further details

15.2 - Settlement of Allocation Interests

Once the issuer’s agent has determined a participant’s allotment of allocation interests, the DvP settlement of those allocation interests occur (refer to section 9). This procedure applies equally to:

  • firm allocations;

  • institutional and retail book builds; and

  • placements.

Procedure

Step

Description

Step

Description

1

The issuer or their agent completes an Application for Admission of a Class of Transactions in DvP Settlement form to ASX Operations.

Under the Corporations Act, the issuer is required to operate a trust account and to pay all application monies into that account. An issuer’s agent may operate a trust account in the name of the issuer, or make alternative arrangements with the issuer for the payment of application monies into the trust account operated by the issuer.

Subject to the application and settlement timetable being approved, ASX will issue a notice detailing the key dates, settlement agent details and other information.

2

The allocation interests are created by the issuer (registry) allotting the aggregate number of allocation interests to the issuer’s settlement agent’s nominated account (HIN) through the Holding Adjustments Process with the reason code:

  • Initial Public Offering (IPOO);

  • Placement Issuer (PLMT);

  • Non-Renounceable Issue (NRNI); or

  • Renounceable Rights Issue (RENI).

3

The issuer’s agent for the primary or secondary market offer notifies the participant of their allotment of allocation interests.

4

The issuer’s settlement agent initiates the Bilateral Settlement Instruction Process with the transaction basis IPO Transaction (IPOO).

CHESS notifies the participant of unmatched transactions.

5

The participant initiates the Bilateral Settlement Instruction Process with the transaction basis IPO Transaction (IPOO).

6

CHESS settles the transactions on the relevant settlement date, which delivers allocation interests to the participant and funds to the issuer or their settlement agent.

7

To transfer allocation interests:

  • For CHESS security holders, the participant may initiate a unilateral demand transfer (refer to section 7.2.1) or unilateral settlement instruction (refer to section 7.4.2) to move the client’s allocation from the settlement entrepot account (HIN) to the security holder’s account (HIN).

  • If the security holder is sponsored by another participant, the participant may initiate a bilateral demand transfer (refer to section 7.2.2) or bilateral settlement instruction (refer to section 7.4.3) to on-deliver units to the sponsoring participant.

  • For issuer-sponsored security holders, the participant may initiate a participant to issuer sponsored transfer (refer to section 6.6.3) to move the security holder’s allocation from the settlement entrepot account (HIN) to the security holder’s issuer sponsored holding.

8

Following the last settlement date, the issuer (registry) transforms the allocation interests into the parent security through the Holding Adjustments Process with the reason code:

  • Initial Public Offering (IPOO);

  • Placement Issuer (PLMT);

  • Non-Renounceable Issue (NRNI); or

  • Renounceable Rights Issue (RENI).

CHESS notifies participants of the transformation.

 

 

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