ASIC rebukes Xpansiv over ‘exchange’ claim

The corporate regulator has reprimanded carbon-trading platform Xpansiv over its claims to be an exchange, saying it has not given the financial operator permission to use the title.

The corporate regulator has reprimanded carbon-trading platform Xpansiv over its claims to be an exchange, saying it has not given the financial operator permission to use the title.

The Australian Securities & Investments Commission said it had contacted Xpansiv and its subsidiary, CBL “in relation to recent Australian targeted marketing materials and terminology used”.

Australian regulatory guidelines allow businesses to referring to themselves as an exchange only if they hold a tier one market licence, or in rare cases tier two.

There are only eight holders of a tier one licence.

Xpansiv holds only an Australian financial services licence via its subsidiary CBL.

“Neither party have an Australian market licence and neither party have sought approval from ASIC to refer to themselves as an exchange. We do not provide such approvals,” an ASIC spokesman said. “CBL, as a subsidiary of Xpansiv, is a large international trading service that uses the terms such as ‘market’ and ‘spot exchange’ in its website and materials that are targeted at users in other jurisdictions.

“During the licensing application process we discuss with applicants, where relevant, matters such as the appropriate terminology to be used for Australian specific operating rules and marketing materials.”

However, Xpansiv has denied receiving a reprimand from ASIC over its branding as an exchange.

Xpansiv chief executive John Melby said the trading platform “worked collaboratively” with ASIC.

“In Australia the (Australian Carbon Credit Units) are a financial instrument – we are not a market operator there,” he said.

“We’re an exchange for everything else, we operate a spot exchange that supports a number of markets.”

Mr Melby said Xpansiv was “purposeful in saying we operate as a trading platform”.

“We try very hard to be precise in Australia with our language,” he said.

Xpansiv, which formed through a 2019 merger of Australian commodity trading platform CBL and San Francisco tech company Xpansiv, is backed by investment giants Macquarie and Blackstone.

The firm trumpeted its securing of an AFSL in October last year, noting it had “today announced that its market-leading energy and environmental commodity spot exchange, CBL, has been granted a market-making Australian financial services licence (AFSL) for carbon products in Australia.” In past interviews with The Australian and other media Mr Melby called Xpansiv an exchange.

Xpansiv also brands itself as “the world’s first commodity exchange built for a new asset class”.

A spokesman for Xpansiv said the firm’s subsidiary CBL “has regular contact with ASIC and will continue to ensure that this distinction (that the firm is not a licensed exchange in Australia) is made clear to its customers (all of whom are wholesale clients)”.

“The word ‘exchange’ is at all times qualified by the word ‘platform’,” the spokesman said.

“The reference to ‘current Australian exchange services in carbon, water, gas, and renewable energy’ is accurate as this refers to pre-existing exchange services for non-financial products – noting that CBL has provided an Australian exchange service for voluntary (non-financial product) carbon products for many years.”

ASIC’s move to put Xpansiv on notice comes as the regulator moves to crack down on marketing material as part of its focus on greenwashing.

Greenwashing is the portrayal of a product’s environmental or social credentials that creates a false impression to investors.  Xpansiv, which was founded in Australia before expanding overseas, has pitched itself as a leading marketplace for energy credit, carbon offset and other forms of commodities.

The trading platform has received backing from Blackstone, which tipped in almost $600m last year, as well as Bank of America, Goldman Sachs, Aware Super, BP Ventures, S&P Ventures, Atlas Merchant Capital and Vitruvian Partners.

But the carbon trading platform has faced challenges, recording a $227m loss last year.

Originally published as ASIC rebukes Xpansiv over ‘exchange’ claim