The federal government is planning to allow new stock market operators to compete against the Australian Securities Exchange (ASX).
On Wednesday the treasurer, Scott Morrison, announced the government’s response to recommendations by the Council of Financial Regulators (CFR) to open up the ASX to competition and develop conditions for competitors to the share ownership clearing house.
CFR will now develop those conditions, as well as regulatory expectations on the ASX’s conduct.
“[It] will mean that should a competitor to the ASX emerge, there will be arrangements in place for safe and effective competition, allowing for a transition to competition over a period of around 18 months,” Morrison told reporters in Sydney.
The government’s response said it would “give considerable weight to the regulators’ views” and it was unlikely it would licence a competitor to the ASX unless it met those minimum conditions. It said it would take at least 18 months for competitors to emerge and for a licence to be approved.
The Australian Competition and Consumer Commission will also be given the power to arbitrate disputes about access to ASX stock clearing and settlement services.
Morrison welcomed the ASX’s plans to develop distributed ledger technology (block chain) for the Australian share market. But the government response noted it could have significant implications for the role of central clearing, and reduce the likelihood the ASX would face competition.
Regulatory expectations set for the ASX “should seek to ensure that technological developments do not preclude effective competition in post-trade services”, it said.
Ownership restrictions on the ASX will also be relaxed by the government, as recommended by the Murray financial system inquiry, to allow the ASX to raise capital more easily.
The government will legislate that the current ASX ownership limit of 15% can be exceeded with the treasurer’s approval if it is in the national interest.
“As treasurer I want to help create an environment where our financial services sector can be both internationally competitive and play a central role in aiding the positive transition of our economy,” Morrison said.
Deregulation and increased competition for the ASX, a listed company itself, would mirror developments in Europe and the US where competition and mergers among exchanges have become the norm in recent years.
The London Stock Exchange, for example, is planning a £20bn ($37.71m) merger with its German rival, Deutsche Börse, while the world’s biggest market, the New York Stock Exchange, merged with its rival Euronext in 2007 before being bought by Intercontinental Exchange.
