Some would see it as merely handing the baton for regulating Australia’s stockmarkets from the conflicted ASX to the slow and infirm at ASIC.
Others, after the Opes Prime and Tricom trading scandals in 2008, would argue it was long overdue and the obvious conflict of interest at the ASX had to be eliminated.
All market trading will now be monitored by ASIC while ASX will continue its prime role of supervising all listed companies.
The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, said in a statement that the move will replace the current responsibility of individual markets to “self-supervise”.
The changes will mean that ASIC will become responsible for supervising trading activities by broker participants, which take place on a licensed financial market, while individual markets — such as the Australian Securities Exchange (ASX) — will retain responsibility for supervising the entities listed on them.
“The supervision of listed entities raises a different set of issues. The Government is comfortable that there is no need for the Government to supervise listed entities. ASIC and the ASX are working well together in performing this role,” Bowen said.
The move will extend to ASIC the current ASX powers of detecting market abuses on the ASX such as insider trading and trading known as market manipulation, which is designed to inflate the price of securities.
Under the current system ASX is responsible for detecting suspected breaches of market rules, but then has to refer them to ASIC for full investigation and decisions on whether to prosecute.
The move also embraces brokers who trade in areas the ASX has no responsibility for, such as over-the-counter derivatives including credit default swaps.
“As part of the Government’s drive to improve regulation of the financial industry, the Government has decided to transfer supervisory responsibility for Australia’s financial markets to ASIC as it is more appropriate for an agency of the Government to perform this important function,” Bowen said.
The ASX currently has supervisory responsibility for more than 100 licensed brokers known as market participants, but there are many more brokers who do not participate on the ASX.
However, the move falls short of the ASX being completely stripped of all its supervisory powers.
The changes are due to come into effect in the third quarter of next year.
Logically there are some gaps already apparent. One of the interesting areas of market manipulation is the way unexplained movements in share prices happen ahead of company announcements.
We have seen it time and again in the past year ahead of companies reporting poor results, or revealing plans to raise new capital. Some share prices fall, some rise in completely unexplained fashion.
The other is the timeliness and speed of price queries and linking them from ASIC to any work at the ASX on statements and other announcements from listed companies.
ASIC doesn’t move fast, now matter what it claims and in trading, querying companies needs speed and accuracy first up and a good eye for market trends.
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