ASX to demand Rudd Government compo
The Age
Thursday October 1, 2009
THE Australian Securities Exchange will demand compensation from the Rudd Government as a result of a sweeping shake-up of market regulation that will strip the exchange operator of some of its powers to supervise brokers.Chief executive Robert Elstone is also urging the Government to tread carefully in its push to open the nation's equities market to competitors at the same time as it undertakes a complex transfer of ASX regulatory powers to the Australian Securities and Investments Commission.His comments follow a decision by the Government last month for ASIC to take charge of real-time market trading supervision and enforcement, which are currently part of ASX's regulatory powers.The move to give ASIC responsibility for regulating brokers is aimed at resolving the long-standing conflict of a listed company supervising brokers trading in a market that the ASX depends on for its profits.Mr Elstone declined to quantify how much the ASX would be seeking as compensation but said shareholders were entitled to receive "fair value" for the transfer of assets such as technology and intellectual property to ASIC. Analysts say such a move could run into millions of dollars.The situation would be similar to that in late 2007 when the supervisory role of the New York Stock Exchange was shifted to the US-based Financial Industry Regulatory Authority and the NYSE received compensation.Mr Elstone said he was seeking talks with regulators on the issue, with any outcome likely to take months to resolve.He told shareholders at the ASX's annual meeting that the shake-up would have a significant one-off impact on this year's profit, but said it was too early to say if it would represent a windfall or cost for the ASX. At the same time, he said the move would not provide the annual boost to earnings over the next few years that some analysts had been anticipating.Mr Elstone noted that the transfer in market supervision to ASIC "will present a significant new challenge" for the securities regulator.The ASX has long argued in favour of its markets supervision division, which employs 110 people."Whether or not the ASX agrees with the Government's specific supervisory reform decision, we acknowledge its right to enact reform," he said. "Ultimately, it is the Government that is charged with acting in what it believes to be €” and being held accountable to €” the public interest."Separately, Mr Elstone noted that equity and futures market activity continued to recover in the first quarter of financial year 2010, following signs of a rebound from April.Secondary capital raisings for the quarter were well up on the same time last year, he said, adding that ASX handled an unprecedented $90 billion of capital raisings during financial 2009 as companies sought to strengthen their balance sheets.While the number of new sharemarket listings remained lacklustre compared with the same time last year, there were some prospects of recovery in line with growth in the economy."As long as first-quarter activity momentum levels are maintained, we would expect to return to a cash-earnings growth trajectory during the second quarter of financial 2010," Mr Elstone said.
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