Stockbrokers, other market participants and market operators will help pay for the Australian Securities and Investments Commission (ASIC) to supervise Australia's equity markets, including those managed by current market operator ASX and newcomer CHI-X, as part of the Gillard Government's drive to open the Australian stock market to competition.
Stockbrokers, other market participants and market operators are encouraged to make a submission to the consultation paper on a proposed cost recovery fee structure for the supervision of Australia's financial markets by ASIC in a multi-operator environment.
Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said "Competition in Australian financial markets will deliver better returns for investors by giving them more choice and better prices. We expect this will attract new players, new trading strategies and new liquidity."
"In the past it was the ASX that supervised the share market and its costs were recovered through its fees, but by opening up the market to competition and transferring supervision responsibilities to ASIC, it is important to consider how market supervision infrastructure costs can best be borne by the market in an efficient, transparent and market neutral way."
The new fees are expected to raise about $18 million a year. However, the cost savings for industry through reduced trading fees and narrower bid-ask spreads are expected to more than offset the additional supervision charges on industry. In addition, the economy as a whole will benefit from an innovative and competitive market lowering the cost of capital raising and creating investment opportunities.
"Opening Australia's financial markets to competition carries the challenge of supervising multiple markets in an environment of high speed and complex trading. The proposed market supervision fee model and cost recovery arrangements represent an important next step in our efforts to support competitive, efficient and innovative equity markets," he said.
"Developments and volatility in the equity markets recently underscore the need for a robust market supervision framework that can effectively safeguard market integrity and confidence."
The proposed cost recovery arrangements have been designed with regard to ASIC's market supervision cost drivers, and the cost recovery approaches conducted by market regulators in other jurisdictions.
The proposed market supervision fee model and cost recovery arrangements will replace the current interim cost recovery arrangements from 1 January 2012.
Since the transfer of market supervision to ASIC in August 2010, further milestones have been achieved in preparation for competition. On 29 April 2011 the Government welcomed the market integrity rules announced by ASIC to provide a framework for competition in equity exchange markets.
To support ASIC's new market supervision role, the Government approved funding to ASIC in 2009‑2010 and 2010‑2011 to meet the costs associated with transferring supervision from certain domestic market licensees, including the ASX, to ASIC, and supporting the introduction of competition in domestic equity markets, subject to funding being fully recovered through fees charged to industry.
Industry comments on the proposed cost recovery fee structure will inform the development of Fees Regulations and a Cost Recovery Impact Statement. Further consultation on an exposure draft of proposed Fees Regulations will follow in September/October 2011.
Consultation on the discussion paper will close on 23 September 2011.