CommSec among brokers slow to pass on ASX fee refunds

The country’s largest online broker, CommSec, is yet to pay refunds to traders affected by the ASX’s five-week service outage last year despite receiving money from the exchange to compensate out-of-pocket derivatives traders.

The ASX’s key service for derivatives trading, TMC, was out-of-action for five weeks late last year after the entire exchange crashed for a full-day in November. Derivatives traders were furious, claiming the outage had put millions of dollars at risk, destroyed volumes and was evidence the ASX had abused its dominant market position.

ASX promised to refund derivatives traders for fees after a five-week outage but now the deadline for payments has been missed. Credit:Louie Douvis

The ASX pledged to refund fees for derivatives traders for the first three months of this year to kickstart the options market, with the first tranche being paid to brokers on February 26.

However, some derivatives traders claim they have not yet received the rebate, raising concerns brokers may be pocketing the fees and prompting criticism of the ASX’s handling of the program.

“Guess what? Brokers aren’t passing it onto customers,” derivatives trader Chris Pederson said. “If you complain, you get it.”

The Commonwealth Bank-owned trading platform, CommSec, confirmed it had not yet passed on fee rebates to around 2000 traders, adding payments would be made by the end of the financial year.

Major broker CMC also confirmed it had not yet passed rebates onto traders, with a spokesman saying it was committed to paying traders in full, but did not specify a timeline.

Mr Pedersen, who oversees around $23 million in contracts per year, criticised the oversight of the fee rebate program.

“Why is the ASX not on top of this and making sure brokers pass it on? It would take minimal action on their part,” Mr Pedersen said.

An ASX spokesman said it is powerless to compel brokers to pay the traders.

“How participants process the rebates with their customers is a matter for them,” a spokesman said. “ASX has no direct relationship with end clients of participants and no ability to direct how participants pass on the rebate.”

Another trader at a top Sydney investment firm, who could not be named because he was not authorised to speak with the media, said he had received the rebates but the amount was negligible.

“My revenue dropped by 30 per cent,” the trader said. “You can’t just go and buy customers off with a few rebates when you can’t trade. The rebates are almost a slap in the face.”

Mr Pedersen said alarm bells started ringing last week when he had not received any money or information from his broker, Commsec, and decided to call them up.

He said he was told no process had yet been established to manage the rebates but his payment would be fast-tracked because he was a “high value” customer.

It’s understood CBA has struggled to set up a system for passing on the rebates, after receiving instructions about the program from the ASX in late December – before the office went into mandatory Christmas shutdown.

A Sydney-based options trader, who could not be named because he was not authorised to speak with the media, said he too had not received any funds.

“The brokers we work with said the ASX is not sure how to sort out these rebates yet,” he said. “I don’t expect us to get something anytime soon. It’s a manual process.”

Morrison Securities managing director William Slack said he had received a spreadsheet from the ASX with details of traders eligible for refunds, adding his firm then worked to set up an automated system to pay its customers.

“I think it’s a good initiative by the ASX to try reinvigorate the market,” he said. “This is the ASX showing some goodwill.”

Mr Pedersen said the Australian Securities and Investments Commission should play a greater role in managing the relationship between brokers and clients to ensure payments are made in a timely matter.

“This is more of an example of how when you get into the nuts and bolts of how markets are regulated, ASIC is clueless,” he said.

A spokesman for ASIC said it was not a matter for the regulator because it was a commercial decision made by the ASX.

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