The corporate watchdog would continue law enforcement against misconduct within markets but the move was designed to guarantee Australia's regulatory arrangements would remain among the best in the world, Swan said.

Next year, legislation will be introduced into Parliament to codify the change, with ASIC advising the Government that it may need three months to appropriately prepare itself, reported the AAP.

The new role, expected to be implemented operationally by the second half of next year, will include supervision of real-time trading on all of Australia's domestically licensed markets.

ASIC chairman Tony D'Aloisio has assured the Government that the watchdog can take on these important responsibilities.

"Following our strategic review in 2007, ASIC is now close to the market, more accessible, flexible, and able to take emerging trends into account more quickly. We have built up our market skills with a number of senior recruitments with market experience. We will be working closely with ASX to ensure a smooth transition of market survelliance and participant supervision responsibilites to ASX," he said.

While individual markets such as the Australian Securities Exchange (ASX) will still be responsible for monitoring their own listed entities, ASIC would take over the responsibility of the independent disciplinary tribunal's supervision of market participants.

"ASX believes the timeframe and the next steps outlined by the Government are appropriate, and will work constructively with the Government and ASIC to implement the transfer of responsibilities," the exchange said in a statement.

Financial Services Minister Chris Bowen said ASIC's role as a "whole-of-market supervisor" would make supervision and enforcement more efficient.