Corporate Law Minister Chris Bowen flagged in December the idea of multiplying by five the maximum penalty for breaking sharemarket trading rules.
But he reneged on his plan, outlined in a consultation paper, after stockbrokers lobbied the government to keep the existing maximum penalty at $1 million.
Mr Bowen said the present penalty was "an appropriate level".
Stockbrokers Association of Australia managing director David Horsfield said $5 million would have been an excessive maximum penalty.
"Nothing has taken place since the level was set, which was not that long ago, to suggest that the level was inadequate to achieve the purpose of ensuring that proper standards of market conduct are displayed by participants in the market," he said in a statement.
Legislation will be introduced in the parliament on Wednesday to transfer market regulation powers from the Australian Securities Exchange to the Australian Securities and Investments Commission (ASIC).
Penalties for companies and individuals found guilty of breaking market integrity will be lower if they co-operate with ASIC, under the legislation.
For these people, the federal government wants the pecuniary penalty a court can order set at 60 per cent of the maximum punishment.
It had earlier wanted the pecuniary penalty set at 80 per cent of the maximum.
"The discount rate for avoiding civil proceedings has been lowered to provide a real incentive to enter into an arrangement with ASIC to avoid civil proceedings," Mr Bowen said in a statement.
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