Commonwealth Numbered Regulations - Explanatory Statements

[Index] [Search] [Download] [Related Items] [Help]

CORPORATIONS (FEES) AMENDMENT REGULATIONS 2011 (NO. 2) (SLI NO 273 OF 2011)

EXPLANATORY STATEMENT

 

Select Legislative Instrument 2011 No. 273

 

Issued by authority of the Assistant Treasurer and Minister for Financial Services and Superannuation

 

Corporations (Fees) Act 2001

 

Corporations (Fees) Amendment Regulations 2011 (No. 2)

 

Section 8 of the Corporations (Fees) Act 2001 (the Act) provides that the Governor-General may make regulations for the purposes of sections 5, 5A, 6 and 6A of the Act, which deal with the imposition of fees for things done under the Corporations Act 2001 (the Corporations Act).

 

The Act allows the Corporations (Fees) Regulations 2001 (the Fees Regulations) to specify the fees imposed by the Australian Securities and Investments Commission (ASIC) for performing its market supervision functions under the Corporations Act, including specifying when the fee liability is incurred.

                                                                                              

The Government announced reforms to the supervision of Australia's financial markets involving the transfer of supervision from individual market operators to ASIC on 24 August 2009, and subsequently announced support for competition between markets for trading in listed shares on 31 March 2010.  Chi-X Australia has been operating a financial market in competition with the primary Australian exchange (that is, ASX) since 31 October 2011.

 

The Regulations amend the Fees Regulations to reflect a revised fees arrangement that is more suitable in a post-competition environment.  In particular, the Regulations allow the charging of fees for the performance by ASIC of its market supervision functions under Part 7.2A of the Corporations Act as directly as possible upon those that have created the need for supervision activities. This is in accordance with the Government's Cost Recovery Guidelines. A Cost Recovery Impact Statement has been developed in respect of the fees arrangement applying from 1 January 2012 to 30 June 2013.

 

Details of the Regulations are included in the Attachment.

 

The Act specifies no conditions that need to be met before the power to make the Regulations may be exercised.

 

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

 

Public consultation was conducted on a proposed post-competition fees arrangement (Consultation Paper - Proposed Financial Market Supervision Cost Recovery Model, 26 August 2011).  Targeted industry consultation was also conducted (both prior to and following the release of the consultation paper), with particular focus on market operators and the major representatives of market participants.  Exposure Draft Regulations were then released for public consultation on 18 October 2011.

 

The Regulations commenced on 1 January 2012.

Details of the Corporations (Fees) Amendment Regulations 2011 (No. 2)

 

Regulation 1 - Name of Regulations

 

Regulation 1 provides that the name of the Regulations is the Corporations (Fees) Amendment Regulations 2011 (No. 2).

 

Regulation 2 - Commencement

 

Regulation 2 provides that the Regulations commence on 1 January 2012.

 

Regulation 3 - Amendment of the Corporations (Fees) Regulations 2001

 

Regulation 3 provides that Schedule 1 amends the Corporations (Fees) Regulations 2001.

 

Regulation 4 - Application

 

Regulation 4 provides that the amendments that are made by Schedule 1 of the Regulations do not apply in relation to the billing period starting on 1 October 2011.

 

Schedule 1 - Amendments

 

Item [1] - Regulation 8

 

This item substitutes regulation 8.

 

Regulation 8 prescribes the fees payable by market operators and participants in relation to ASIC's supervision of those financial markets.

 

The liability for the fees imposed under the regulation is not affected by the issuing of an invoice by ASIC.  ASIC will issue invoices following the end of the billing period after the necessary compilation of transaction and message data.  If required, ASIC may issue amended invoices. An entity's liability to pay a fee exists independently of any invoice issued.

 

Subregulations 8(1) to 8(2)

 

Subregulations 8(1) to 8(2) insert a prescribed fee for small financial markets.  Subregulation 8(11) defines a small financial market as:

 

•                 a financial market that is not an exempt market, a wholesale financial market, or a market operated by the Australian Securities Exchange Limited, the ASX Limited or Chi-X Australia Pty Ltd;

•                 one which is licensed under subsection 795B(1) of the Corporations Act 2001 (the Corporations Act); and

•                 where the total value of completed transactions in securities on the market is less than $2.5 billion per billing period. 

 

Where ASIC performs functions under Part 7.2A of the Corporations Act in respect of such a market a fee of $9,375 is incurred per billing period. 

 

Subregulation 8(1) intends that where ASIC has not been performing its functions under Part 7.2A of the Corporations Act, for example not monitoring trading and participants, then no fee is to be levied.  Subregulation 8(2) provides that the time the liability for the fee is incurred is the first day after the billing period in which ASIC performs its functions.

 

Subregulations 8(3) to 8(4)

 

Subregulations 8(3) to 8(4) inserts a prescribed fee for wholesale financial markets.  Subregulation 8(11) defines a wholesale financial market as:

 

•                 a financial market that is not an exempt market, a small financial market, or a market operated by the Australian Securities Exchange Limited, the ASX Limited or Chi-X Australia Pty Ltd;

•                 one which is licensed under subsection 795B(1) of the Corporations Act;

•                 where each participant in the market is a wholesale client within the meaning of section 761G of the Corporations Act; and

•                 where each participant trades on its own behalf or on behalf of other wholesale clients. 

 

Where ASIC performs functions under Part 7.2A of the Corporations Act in respect of such a market a fee of $9,375 is incurred per billing period. 

 

Subregulation 8(3) intends that where ASIC has not been performing its functions under Part 7.2A of the Corporations Act, for example not monitoring trading and participants, then no fee is levied.  Subregulation 8(4) provides that the time the liability for the fee is incurred is the first day after the billing period in which ASIC performs its functions.

 

Subregulations 8(5) to 8(6)

 

Subregulation 8(5) inserts a prescribed fee for ASX 24 which is $386,000 per billing period.

 

Subregulation 8(5) intends that where ASIC has not been performing its functions under Part 7.2A of the Corporations Act, for example not monitoring trading and participants, then no fee is to be levied. Subregulation 8(6) provides that the time the liability for the fee is incurred is the first day after the billing period in which ASIC performs its functions.

 

Subregulations 8(7) to 8(8)

 

Subregulation 8(7) inserts a prescribed fee for an operator in the cash equity markets during the billing period.  Billing period is defined in subregulation 8(11) to mean each period of 3 months starting on 1 January 2012, 1 April 2012, 1 July 2012, 1 October 2012, 1 January 2013 and 1 April 2013.

 

Depending on whether the operator is ASX Limited or Chi-X Australia Pty Ltd, the amount of the fee is determined by different formulae under subregulation 8(7).  The formulae are comprised of an activity-based component and a fixed component.

 

The activity-based component uses a fraction approach; that is, a numerator and denominator.  The first fraction (TR / TTR) relates to an operator's share of the total number of transactions executed on or reported under the operating rules of all cash equity markets during the billing period, that after all processing or conversion necessary, are recognised by ASIC's Integrated Market Surveillance System (IMSS) as executed transactions.  Non-information technology (IT) costs for operators ($405,504 per quarter) would be charged based on share of transaction activity.  The second fraction (MR / TMR) relates to an operator's share of the total number of messages from all cash equity markets during the billing period, that after all processing or conversion necessary, are recognised by ASIC's IMSS as orders or executed transactions. Some processing and conversion is necessary in ASIC's IMSS system because some IT systems generate more than one message for a single order or executed transaction.  Those multiple messages undergo a series of conversions in the IMSS system before being recorded in a standardised format, and it is the final, standardised format that is to be counted in the formulae.  IT costs for operators ($214,470 per quarter) would be charged based on share of message activity.

 

The fixed component ($44,310 in respect of ASX Limited and $72,730 in respect of Chi-X Australia Pty Ltd) relates to marketplace specific costs, such as IMSS connectivity, IMSS configuration costs and rack space and installation.

 

Subregulation 8(8) provides that the time the liability for the fee is incurred is on the first day after the billing period in which ASIC performs its functions.

 

Subregulations 8(9) to 8(10)

 

Subregulation 8(9) inserts a prescribed fee for a participant in a cash equity market during a billing period.  The amount of the fee is determined by an activity-based formula which uses a similar fraction approach as that used in subregulation 8(7). There is no fixed component for this formula.

 

The first fraction (TR / TTR) relates to a participant's share of the total number of transactions executed on or reported to the cash equity markets by all participants during the billing period, that after all processing or conversion necessary, are recognised by ASIC's IMSS as executed transactions.  Non-IT costs for participants ($2,486,069 per quarter) would be charged based on share of transaction activity.  The second fraction (MR / TMR) relates to a participant's share of the total number of messages by all participants in the cash equity markets during the billing period, that after all processing or conversion necessary, are recognised by ASIC's IMSS as orders or executed transactions. Some processing and conversion is necessary in ASIC's IMSS system because some IT systems generate more than one message for a single order or executed transaction.  Those multiple messages undergo a series of conversions in the IMSS system before being recorded in a standardised format, and it is the final, standardised format that is to be counted in the formulae.  IT costs for participants ($1,314,876 per quarter) would be charged based on share of message activity.

 

Subregulation 8(10) provides that the time the liability for the fee is incurred is on the first day after the billing period in which ASIC performs its functions.

 

Item [2] - Subregulation 9(1)

 

This item provides that if a fee prescribed in regulation 8 remains unpaid 60 days after the day on which liability is incurred, then the late payment fee regulation applies.

 

Item [3] - Paragraph 9(2)(b)

 

This item changes the current penalty interest rate for late payment of market supervision fees from a rate quoted by the Reserve Bank of Australia (the yield to maturity rate applicable on the due day) to a 20 per cent per annum rate, to be calculated daily and charged twice monthly on the 6th and 20th days of the month.

 

Item [4] - Subparagraph 9 (3)

 

This item adjusts the time at which liability for the late payment fee arises so that it is incurred 60 days after the day on which liability for the fee prescribed in regulation 8 is incurred, and is applicable to both market operators and market participants.

 

 

 

AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback