Preliminary Pages

Foreword

The Corporations (Fees) Amendment Bill 2011 is a very simple piece of legislation that allows ASIC to charge market participants (such as stockbrokers) fees to support its supervision of exchange markets. The fees will be set in regulations to be gazetted after the Bill becomes law.

The Bill is part of a wider Government policy to improve Australia’s position as a financial centre. Previous Government reforms have enabled other firms to operate exchanges in addition to the ASX. As a result, Chi-X Australia will commence operating a market for cash equity shares later in the year subject to a number of conditions being met. This threat of competition has brought down ASX costs to market participants by approximately $20 million annually with the potential for further reductions. The ASX has also introduced a wider range of services for market participants.

There are several key reasons to support the Bill. In particular, it complies with the Government’s cost recovery guidelines, which were developed by the previous government in 2005. Simply, the finance industry is receiving a direct, significant benefit from ASIC’s supervision of markets and stockbrokers are responsible for a significant portion of the time and effort that ASIC expends on supervision.

Further, asking stockbrokers to pay for supervision prevents the complications of the Government charging market operators, who would then pass on the costs to stockbrokers. Brokers may be reluctant to give some of their business to Chi-X or another entrant if the pass-through of costs affected the new entrant’s competitiveness. Charging stockbrokers also prevents incumbent market operators from cross-subsidising parts of their business subject to new competition.

An important ancillary issue in the inquiry is the fees that ASIC will charge under regulations. This is currently the subject of Treasury consultation. Treasury has issued a comprehensive consultation paper, which will serve as an appropriate basis for designing the fee structure. Industry raised legitimate concerns about proposals in the consultation paper. The committee anticipates that Treasury will respond to these concerns, either through further explaining its position or by making appropriate changes.

The Bill should pass because it is an appropriate way of funding ASIC’s market supervision activities. It is not the centrepiece of the shift to competition, but it is informed by competition principles and will be an important part of the ‘competition infrastructure’.

I would like to thank the organisations that assisted the committee during the inquiry through submissions or participating in the hearing in Canberra. I also thank my colleagues on the committee for their contribution to the report.

Julie Owens MP
Chair

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