Feedback of Proposed Funding Model for the Australian Securities and Investments Commission:
1. Do you agree with the proposal that all of ASIC’s regulatory costs should be included in the
industry funding model, excluding ASIC’s registry costs and criminal prosecutions incurrent by the
DPP? If not, please describe your preferred approach and reasons for it:
o
o
o
I do not agree with this approach, as the cost recovery element of ASIC’s costs seem to
be double dipping in nature. As a government body, I’d have assumed this was
completely covered within the forward estimates of the Department of Finance and
Treasury, with the costs being met via taxes paid by both individuals and companies
within this country;
If the government is allowed to pursue this strategy, then a focus needs to be applied to
how certain fledging companies which are trying to create a competitive market are to
be charged for the service:
 There needs to be a minimum revenue or market size applied before such costs
are relevant. Smaller firms get charged with substantial start-up costs, and to
add further a cost recovery per line item to smaller exchanges is anticompetitive in nature, as the ASX did not face such high hurdles when it
commenced. Thus, it is unfair to impose such aggressive hurdles on companies
which are merely trying to create a competitive landscape.
 The ‘small’ category is too large. A ‘micro’ category needs to be implemented
for exchanges that have below 100 listings. These micro exchanges should have
indirect charges waived, as a fee of 200K per annum will destroy the economics
of these micro exchanges. Once they are over 100 listings, the economics of a
working business model changes, and cost recovery can be adequately taken
within the operating costs of an exchange without causing financial disruption.
I believe that the Industry cost recovery model should apply once an exchange has
proved it can operate as a going concern. From that year onwards, this should become a
business expense for that exchange. The test should be on number of listings (I believe
100 listings to be proof a company has met the criteria as a stand-alone going concern,
and no longer be classified as a ‘micro’, but rather a ‘small’ exchange).
2. Will the proposed model design objectives ensure consistency of approach to setting levies and
fees across ASIC’s regulated population? Are there any other objectives that should be
considered? If so, why?
o
o
I believe the approach will be consistent, but it needs to only ‘commence’ once an
exchange has in-excess of 100 listings. For a small exchange to be charged 200K per
annum, when the listings are below 100, is completely uneconomic and egregious. Until
that point, our exchange is purely a developing market, and ASIC is under an obligation
to encourage competition in a market place which has a quasi-monopolistic player
which had previously enjoyed the benefits of government support which is no longer
being availed to new exchanges.
As such, I suggest a ‘micro’ category be developed, which allows for companies that
have sub 100 listings to have the time to develop their markets.
3. Do you agree with the proposed model for calculating levies? Is there an alternate approach you
would prefer? If so, please explain why.
o
o
o
I believe the proposed model does not take into account the necessary fundamental
principle of supporting competition. Many of the activities carried out by ASX have been
supported in the past with virtually no focus on cost controls. New exchanges trying to
grow their business should not be burdened by additional costs which were not
previously borne by the quasi-monopolist in the market.
If ASIC wish to encourage competition, these charges should not commence for a
‘micro’ market operator until that company satisfies a criteria that it can be an ongoing
concern, and operate at a level of at least 100 companies listed on the exchange. From
that time onwards, an exchange should be large enough to be able to absorb these costs
(in a measured manner, taking into account the volume associated with their exchange).
Total costs borne by exchanges within the industry should be based on a percentage of
volume of transactions or volume of listings. That ratio should then be applied to any
cost recovery assumptions.
4. Do you agree with the proposed definitions for industry subsectors and levy metrics at Schedule
1? Is there an alternative approach you would prefer? If so, please explain why.
o
o
No, I believe that there should be a separate classification. A small equity market
operator is one which has less than 10 million transactions in the previous year. I believe
there should be a separate classification entitled ‘micro (exempt) market operators’,
where transactions are less than 100,000.
Those entities should be classified as exempt to this cost recovery model, as it should be
deemed a necessary cost borne by the overall market to ensure competition is alive.
Once those firms migrate from micro to small, a charging model should apply.
5. Do you agree with the proposed timeline for annual reporting? Are there any reasons as to why
the suggested timelines may not work for your organizations business cycle?
o
o
o
My first disagreement stems from the fact I still view this as governmental ‘double
dipping’, with our existing tax structure seemingly covering this.
My second disagreement stems from the fact that I believe ‘micro’ companies should be
excluded from the cost recovery provisions.
On the logical assumption that a ‘micro’ category is accepted, then once companies
move from ‘micro’ to ‘small’, the timing of the reporting is acceptable.
6. Do you agree with the proposed engagement and accountability measures? Are there additional
measures you would prefer? If so, please explain why.
o
The methodology is acceptable, notwithstanding my previous comments regarding a
need for a ‘micro’ category.
7. Do you have any preliminary comments on the legislative arrangements?
o
In establishing a legislative framework, ASIC need to ensure that they are adequately
representing what the establishment and support of a free-market looks like. As such,
the failure to not establish a ‘micro’ category is not consistent with supporting the
Australian Capital Market system. The incumbent quasi-monopolist (ASX) have
benefitted and grown due to having the necessary support. To remove this from a
‘micro’ market operator is tantamount to being anti-competitive in nature.
Arrangements need to be established to support growing markets and growing
exchanges. Once these ‘micro’s’ have grown to a sufficient level, I’m fully supportive of
them being charged as a member of industry (based on a percentage of volume).
8. Do you have any comments on the proposed implementation timetable? Please provide details
of any concerns.
o
o
o
o
I am concerned that the timetable is ‘aggressive’ from a timing perspective. I think ASIC
needs to ensure that it has fully consulted with Industry, and understood all industry
members valid concerns. Focus on just retrieving costs, without a focus on ensuring a
competitive landscape exists is negligent.
We need to be able to offer multiple solutions to the global market place if we are to
grow Australia as a viable global capital market. If ASIC do not support creating choice in
the environment, Australia will fall behind our international competitors.
Constant conversation is important in a process like this. Industry need to offer solutions
and then have them discussed both directly with ASIC and more broadly as an industry.
Otherwise, the solution delivered will not work for anyone.
To ensure that Industry has the appropriate and consistent dialogue with ASIC, I believe
the timing should be for full industry consultation to occur up until the end of Q2 2017.
From there, the current timeline can occur.
9. What do you estimate the regulatory cost of complying with the new requirements in the model
to be? In order to answer this, you may wish to consider information such as the following:
o How many hours will it take to train relevant staff about the new compliance
requirements?
o How many hours will it take to implement/update systems to ensure compliance?
o Will you need to procure professional advice or services to comply with the model? What
is your estimate of the total cost of this procurement?
o How many hours will it take for relevant staff to evaluate and plan for the new
regulatory requirements?
o How many hours will it take for staff to assemble and report any information required?
o What is the estimated total labour cost of these activities?
Please only consider the cost of additional activities, beyond compliance activities that you
currently perform. Please do not include the costs of levies and fees to be paid or opportunity
costs in answer to this question. We seek this feedback elsewhere.
o
The overall costs to our small business are extremely significant. As a ‘micro’ business, it
is well outside our budgeted staffing levels to be able to support this additional work. I
would suggest that this may require a full headcount over twelve months to support this
type of activity. Given this eventuality, I estimate the total cost over twelve months to
be approximately AUD 75,000.
10. Do you agree with the proposed business activity metrics and subsector groupings for calculating
levies? If not, please outline your preferred approach and reasons for this preference.
o
o
o
No. I believe that ASIC needs to add an additional category to it’s methodology, that
being a ‘micro’ category. Given the significant size of operations of a company that is
considered ‘small’, I believe the categorization of charges starts too early.
A ‘micro’ will either have less than 100 companies or turnover under 100,000
transactions per year.
For smaller companies that offer competition to existing exchanges, I believe that this
methodology allows for the most convenient means of developing a competitive market
landscape. Failure to do so will condemn the Australian market to the real possibility of
only being operated in a quasi-monopolistic manner.
11. Which levy metrics are available within your business? And which are you currently reporting?
o
The most relevant levy metric we track and report upon is our volume. Being an
exchange, we report all our activity to ASIC already.