The ASX is greatly changed in recent times. Now it is a public company listed on its own exchange and is no longer the regulator of the country’s equity and derivative markets.
One little monopoly it is likely to hang on to for a while yet is that of clearing, with the decision from the Council of Financial Regulators – and the federal government – to extend the ASX clearing monopoly for another two years.
The official reason, so far, is that the advent of another clearing provider – most likely the London-based Clearnet – would add more costs to the industry and require more regulation to provide a safe framework.
That may be so, but in material terms the immediate impact will be to shore up the ASX bottom line at a time when its profits have been wobbling.
Clearing comprises as much as 14 per cent of ASX revenues, and was a key factor in the government decision to reject the merger – or takeover – bid from the Singapore Exchange back in 2011.
Whether Singapore, or anyone else, is on the prowl right now is an unknown, but the reality is that the ASX clearing monopoly will continue to make the company – for that is what it is – safe from takeover for a while yet.
Global equities trading has changed markedly. There are alternative trading platforms and dark pools operating offshore, and the pressure is on the revenues of traditional exchanges where the momentum is for consolidation and mergers.
Vital organ or national hubris?
The question must be asked: is clearing really a vital part of Australia’s financial infrastructure as is implied by the monopoly decision or are we simply being slightly reactionary and a tad nationalistic here?
There’s no doubt that the ASX has been simultaneously running a charm offensive and a fear campaign on the clearing issue, and it would have seem to have won that battle now – at least for the duration.
However, the curious situation remains. A publicly listed, commercially driven company has had its monopoly in a key area extended, instead of facing a challenge from an efficient and proven international competitor.
In how many other industries would that happen? This is not national security, after all.
The frustration at Clearnet in London must be intense. The company’s view – driven by its own self-interest of course – is that a safe and efficient financial system is dependent on competition.
That is the view that prevailed when Chi-X was given its licence to operate in Australia, but it seems clearing is a bridge too far. But for how long, one wonders?
Overall, the prevailing feeling is that the Australian regulators have failed to move with the times and that the last vestige of the old ASX will hang around – for another two years at least.
By that time, will the market have passed us by?