Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Wednesday, 18 February 1987
Page: 268

Mr LIONEL BOWEN (Attorney-General)(3.55) —I move:

That the Bill be now read a second time.

This Bill is the same in substance as the one I introduced at the end of the last session of Parliament. It provides legislative support for the establishment of a single national stock exchange and the creation of a National Guarantee Fund. The Bill incorporates a number of minor technical amendments the need for which has become apparent since the introduction of the previous Bill. By way of background, the Ministerial Council for Companies and Securities, at the request of the Australian Associated Stock Exchanges-AASE-approved introduction of the previous Bill into this Parliament at the earliest possible opportunity. This was done to enable the exchanges to fully develop the constituent documents and business rules of the national stock exchange on the basis of the restructuring provisions contained in that Bill. The AASE's primary concern in pressing for that early introduction and passage of the Bill in the current session is that the Trade Practices Commission's authorisation for a number of existing stock exchange practices expires on 31 March 1987. The Commission identified these practices as being anti-competitive and refused to authorise them beyond 31 March 1987.

The new articles of association for the single national exchange to be established by the Bill address these areas of TPC concern. For example, the restrictions on corporate ownership have been removed. Authorisation has been sought for these changes and the AASE is concerned to avoid the need for some `interim' structure to be put in place after 31 March 1987. To do this it is necessary for the Bill and the necessary State and Territory translator regulations applying the Bill's provisions in those jurisdictions to be in place by 1 April 1987.

By introducing the previous Bill in the last session to meet the AASE's timing concerns, it was possible to closely examine some of the more technical aspects of the Bill. As noted, this has pointed up the need for a number of minor changes. There are no policy changes involved. A number of amendments are designed to ensure there is a proper jurisdictional nexus between the proposed National Guarantee Fund provisions and each State and Territory comprising the co-operative scheme. In addition, a potential anomaly in relation to multiple claims against the National Guarantee Fund in respect of dealer insolvencies has been rectified. Minor drafting changes have also been made to facilitate the making of State regulations which ensure that, without changing the policy of the Commonwealth law, this legislation can sensibly be applied as State law.

As with the introduction of the previous Bill, I introduce this Bill pursuant to the Commonwealth's obligations under the co-operative companies and securities scheme. In accordance with the formal agreement under that scheme, the Ministerial Council for Companies and Securities has approved introduction of the Bill into this Parliament. The restructuring of the stock exchanges and the creation of a National Guarantee Fund will be achieved by amendment of the Securities Industry Act 1980. Consequential amendments will also be made to other co- operative scheme legislation.

The impetus for change to the structure of the major Australian stock exchanges has come from the stock exchanges themselves. The Australian Associated Stock Exchanges formally requested legislative support for the change from the Ministerial Council in March 1986. Such support is required because of the significant logistic and timing difficulties inherent in separate schemes of arrangement in each State which would otherwise be necessary to facilitate the desired restructuring.

It is worth noting briefly the sorts of developments in Australia which have prompted Australian stock exchanges to adopt a more national focus. One of the major developments in Australia and throughout the world's capital and securities markets has been the trend to internationalisation of securities markets. This has been stimulated by technological advances in communication, increasing sophistication of investors in the management of their financial risks and, of course, this Government's initiatives in abolishing exchange controls as part of its general policy of deregulating the financial system. Accordingly, Australian stock exchanges have been subject to greater competition from overseas exchanges.

In this context, the AASE has estimated, on the basis of interviews with larger stock exchange members, that a substantial proportion of their business-ranging between 30 per cent and 50 per cent-was being sent overseas either for execution, in relation to Australian securities, or for investment in securities issued by overseas companies. This development alone suggests that Australia's current fragmented State based stock exchange system is inappropriate and that anything that can be done to assist in providing a stock exchange structure better able to meet this competition should be done. There is also increasing pressure from investors for a national securities clearing house to speed up transfer of securities and for the adoption of screen trading. These trends also serve to highlight the need for a more streamlined and integrated system for trading securities and raising capital in Australia.

The associated establishment of a national guarantee fund to replace the existing separate fidelity funds of each of the State capital city exchanges will assist in maintaining investor confidence in Australian securities markets. The 1986 Australian Shareownership survey conducted by the AASE indicated that almost 90 per cent of adult Australians do not own shares. One of the major reasons given by those surveyed was that they preferred safer, less risky, investments. The contract guarantee and insolvency protection afforded by the National Guarantee Fund may serve to alleviate some of these concerns. The no-fault contract guarantees will ensure that where a party to a securities transaction does not complete his obligations, those obligations will be met by the National Guarantee Fund. This no fault system of contract guarantees contrasts with claims against existing fidelity funds under the provisions of Part IX of the Securities Industry Act 1980 where defalcation or fraudulent misuse of property is required to establish a claim. Direct access to the National Guarantee Fund for compensation in respect of a dealer insolvency also contrasts with existing fidelity fund provisions which only allow for compensation via formal Bankruptcy Act mechanisms.

In addition to these investor protection measures, the establishment of the National Guarantee Fund will enable funds to be made available for industry development purposes approved by the Ministerial Council. These funds will comprise the amount of the pooled assets not required for investor protection purposes and it is envisaged that one of the purposes for which such funds will be used is the establishment of a centralised securities clearing house.

Financial Impact Statement

The Bill will not have any financial impact on Government revenue and expenditure. Sharemarket investors will benefit from the contract guarantee and insolvency provisions of the National Guarantee Fund. The capital and securities market is expected to become more efficient from the more co-ordinated, centralised ASX approach. In addition, allocation of excess funds of the National Guarantee Fund to national development purposes approved by Ministerial Council should allow technological advances with resulting efficiencies.


This Bill assists the stock exchanges in their attempt to establish a more co-ordinated nationally oriented securities market and provides additional investor protection to maintain confidence in that market. I commend the Bill to the House and also present the explanatory memorandum.

Debate (on motion by Mr Spender) adjourned.