Minister for Financial Services, Superannuation and Corporate Law
9 June 2009 - 14 September 2010
Government Releases Market Supervision Fees Regulations
The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, has this morning released draft regulations that set out how the Australian Securities and Investments Commission (ASIC) will recover the costs of market supervision.
The Corporations (Fees) Amendment Act 2010, passed in March, already provides for a fee to be charged to market operators. The regulations released today set out the fee ASIC will charge once it begins supervising markets.
"The proposed regulations, in their present form, are unlikely to have any major impact on the market," Mr Bowen said.
"While market operators will have to pay new fees, they will no longer bear the costs of carrying out the supervision themselves."
The proposed regulations set out a flat fee for market operators. The fee varies depending on the size of the market.
Given the significant developments that are expected to occur in Australia's financial markets over the next year, the proposed regulations only provide details of the fees ASIC will charge market operators for an interim period.
Submissions may be lodged electronically, by post or facsimile to:
Market Supervision Regulations
Corporations and Financial Services Division
PARKES ACT 2600
Fax: 02 6263 2770
The closing date for submissions on the draft regulations is 28 June 2010.
The draft regulations and further information on these reforms are available at www.treasury.gov.au.
18 June 2010
Commentary on the Fees and Regulations
Treasury is seeking comments on the proposed regulations to support the Corporations (Fees) Amendment Act 2010 (the Act). These regulations specify the details regarding how fees will be levied to recover the cost of financial market supervision by the Australian Securities and Investments Commission (ASIC).
The closing date for submissions is 28 June 2010.
Developments to date
On 24 August 2009 the Government announced that it had decided to transfer the responsibility for supervision of Australia's domestic licensed financial markets from market operators to ASIC.
An exposure draft of the Corporations Amendment (Financial Market Supervision) Bill 2009 and a short consultation paper went out for public consultation on 2 December 2009. The consultation paper sought comments on the proposal for ASIC to perform the supervision function on a cost recovery basis. Submissions to that consultation closed on 24 December 2009.
The Act received Royal Assent on 25 March 2010. The Act provides for the regulations to specify how fees will be imposed on market operators to recover the cost of ASIC supervision.
Commentary on the regulations
The Wallis Inquiry, which reported in 1997, made a recommendation that regulatory agencies should collect enough revenue from the financial entities which they regulate to fund themselves. The principle is that for reasons of equity and efficiency, the costs of financial regulation should be borne by those who benefit from it.
In line with this principle, the Act provides ASIC with the ability to impose a fee on market operators in relation to the functions it will be performing under the new Part 7.2A of the Corporations Act 2001.
Given the significant developments that are expected to occur in Australia's financial markets over the next year, the proposed regulations only provide the details of how ASIC will be recovering the cost of its new function for an interim period. During this period a further examination of the market supervision fees regime will take place.
Details of the regulations
The proposed regulations set out how ASIC may recover costs associated with its supervision of domestically licensed financial markets by levying a fee on financial market operators.
The regulations distinguish the size of the fee by the type and size of the markets, which are divided into four categories for the purposes of administering fees.
The four categories are:
- small financial markets;
- wholesale financial markets;
- the Sydney Futures Exchange; and
- the Australian Securities Exchange.
The Corporations Amendment Regulations 2010, which have already been consulted on, state that several markets are intended to be initially exempt from ASIC supervision under paragraph 798L(1)(b) of the Corporations Act 2001. These markets will also be exempt from the fee regime for so long as they are exempt from ASIC supervision. Where this document or the fees regulations make reference to exempt markets, they refer to those markets that are exempt from supervision via regulations made under paragraph 798(L)(1)(b) of the Act. These should not be confused with markets that are exempt from the market licensing regime.
Small financial markets
The proposed regulations define small financial markets as licensed markets where the total value of completed transactions in securities during the billing period (i.e. per quarter) is less than $2,500,000,000, and where the market is not an exempt market, a futures market or a wholesale market. At present, these criteria cover four markets: the National Stock Exchange, Bendigo Stock Exchange, Asia Pacific Exchange, and IMB Ltd.
If ASIC performs functions in relation to the market under Part 7.2A of the Corporations Act 2001, the proposed regulations prescribe a flat fee of $9,375 per billing period. This fee will be reduced proportionately for the first period if it is less than three months.
This set amount reflects the anticipated annual cost of supervising these markets, which consists of one full time employee of an EL2 level for all the four small markets, including administrative and overhead costs.
Wholesale financial markets
The proposed regulations define wholesale financial markets as licensed markets where the only participants are wholesale clients who act only on their own behalf or on behalf of other wholesale clients, and are not exempt markets.
The Corporations Amendment Regulations 2010, which have already been consulted on, state that Bloomberg, Mercari, BGC, and Yieldbroker are intended to be initially exempted from ASIC supervision to provide ASIC with additional time to consider tailored market integrity rules for these markets. Consequently, at the beginning of the transfer of supervision to ASIC, there will be no wholesale financial markets supervised by ASIC, and therefore there will be no markets incurring a wholesale financial market supervision fee.
Nevertheless, the proposed regulations prescribe a fee structure for wholesale markets which is essentially the same as that for small markets, amounting to a $9,375 per period fee with proportionate reduction for the first period if it is less than three months. This regulation will apply at the time ASIC begins supervision of any wholesale financial market.
Sydney Futures Exchange and Australian Securities Exchange
The proposed regulations impose a flat fee on the Sydney Futures Exchange and the Australian Securities Exchange (ASX). The amount of the fee for the 2010-11 financial year totals $555,000 for the Sydney Futures Exchange and $3,145,000 for the Australian Securities Exchange.
This amount reflects some of ASIC's expected costs for the year 2010-2011, including operating expenses, employment expenses, the cost of acquiring SMARTS and training, testing and legal costs.
The ASX and ASIC have recommended to the Minister that excess money from the National Guarantee Fund (NGF) be used to reduce some of the transitional costs associated with the transfer of supervision that would otherwise be passed on to the market. The Government is supportive of this approach and will look at adjusting the Corporations Regulations 2001 in the near future to allow this to occur.