EXPLANATORY STATEMENT
Subject - Securities Industry Act 1980
Securities Industry Regulations (Amendment)
1990 No 351
Subsection 150(1) of the Securities Industry Act 1980 (the Act) provides that the Governor-General may make regulations for the purposes of the Act. Subsection 150(5) of the Act provides that the power of the Governor-General to make regulations shall be exercised only in accordance with advice that is consistent with resolutions of the Ministerial Council for Companies and Securities (the Council).
The Council was established under an Agreement between the Commonwealth and the States, executed on 22 December 1978 (the Agreement), that provides the framework for a co-operative Commonwealth-State scheme for a uniform system of law and administration in relation to company law and the regulation of the securities and futures industries in the six States, the Australian Capital Territory and the Northern Territory of Australia.
Under subclause 45(1) of the Agreement, the Council may consider a proposal for the amendment of regulations made under the Commonwealth Acts enacted for the purposes of the co-operative companies and securities scheme. Should the Council approve any draft amending regulation which gives effect to such a proposal, the Commonwealth is then required, under subclause 45(2) of the Agreement, to submit the draft regulations to the Federal Executive Council for making by the Governor-General.
The Regulations are in accordance with a resolution of the Council.
The purpose of the Regulations is to prescribe two named indexes so that the Act will apply to option contracts based on these indexes.
Subsection 4(8A) of the Act defines the option contracts to which the Act applies. Paragraph 4(8A)(b) includes in this definition contracts (entered into on a stock market) under which one of the parties acquires a right or option to be paid an amount determined by reference to a specified index, being the Australian Stock Exchanges All Ordinaries Price Index or a prescribed index.
Three named indexes were previously prescribed by regulation 5B of the Securities Industry Regulations for the purposes of paragraph 4(8A)(b), namely the Nikkei Index, the S & P (Standard & Poors) 500 Composite Stock Price Index, and the FT-SE 100 Index (which are based respectively on certain stocks traded on the Tokyo Exchange, the New York Exchange and the International Stock Exchange of the United Kingdom and the Republic of Ireland).
The two new indexes are the Australian Stock Exchange Twenty Leaders and Fifty Leaders Share Price Indexes. The key criteria for selection as one of the leading securities are market capitalisation and turnover. Both indexes are now calculated by the Australian Stock Exchange on a daily basis. Prescription will allow options based on these indexes to be traded.