Australia moves to end ASX clearing monopoly

The Australian treasurer has revealed plans that pave the way to ending the monopoly currently enjoyed by the Australian Securities Exchange (ASX).

Treasurer Scott Morrison announced on Wednesday that the government would allow new stock exchange operators to enter the market for the first time. The announcement comes as a response to recommendations made by the Council of Financial Regulators (CFR) that conditions be developed that would ‘open the door’ to competitors to the share ownership clearing house.

Morrison says it will take at least 18 months for any competitor to emerge and a license to be approved. In the meantime, the CFR will develop the conditions for competition, as well as regulatory expectations around the ASX’s own conduct.

‘At the moment, the ASX is the sole provider of clearing and settlement services for shares,’ Morrison said in a speech in Sydney. ‘The reform package I announce today 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.’

Acknowledging that ‘a likely competitor in this space is not expected to emerge, certainly in the near term’ ‒ meaning that Australia is likely to ‘be working and continuing to work, potentially for a long time, with a monopoly operator’ ‒ Morrison also unveiled ‘a set of minimum standards and conditions that will better emulate a more competitive market in this area.’

These include a welcome for the ASX’s plans to develop distributed ledger technology, also known as ‘blockchains’ – essentially a secure network of computers that continuously maintain records – for the Australian share market, a more general focus on financial technology and the relaxing of ownership restrictions. This last point will see legislation allowing the current ASX ownership limit of 15 percent to 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 would follow moves made in both Europe and the US, where competition has increased and which have seen a spate of mergers – and attempted mergers – in recent years.