©Reuters. FILE PHOTO: A board displaying share prices is adorned with the Australian Securities Exchange (ASX) logo in central Sydney, Australia February 13, 2018. REUTERS/David Gray
By Byron Kaye
SYDNEY (Reuters) – A leading Australian equities trading technology company backed a government proposal to break exchange operator ASX Ltd’s effective monopoly on clearing and settlement, saying its failed soReported Mediasware overhaul shows the need for new market entrants.
In a bill released this week, the federal government said it wanted to give potential competitors to the ASX’s clearing and settlement operations equal access to financial markets infrastructure.
The new rules would also give the Reserve Bank of Australia and the Australian Securities and Investments Commission, which together regulate the ASX, greater oversight over clearing and settlement providers to prevent dominant players from crowding out competition.
“We encourage anything that fosters innovation,” said David Ferrall, CEO of trading technology platform FinClear Pty Ltd, which is involved in processing about half of the ASX’s retail trades.
“One of the main reasons we haven’t seen competition in the Australian market is that the skills of ASX and CHESS were so dominant and there wasn’t really enough revenue or a business case for anyone to recreate CHESS,” added Ferrall which relates to the electronic sub-registry system of the ASX Clearing House.
Although Australian financial regulators have been calling for greater competition in clearing and settlement functions for years, a failed overhaul of the ASX’s all-in-one legacy soReported Mediasware system has renewed pressure from market participants to challenge the near-monopoly.
In other major financial markets, clearing and settlement or confirmation of the transfer of share ownership and updating of share registers are managed by separate entities for the market operator.
An ASX spokesman said the company wants to work out the details of the reforms with the government and regulators.
“ASX is open to ensuring that there is a clear regulatory structure to create competition in clearing and settlement services and supports strong regulatory oversight of critical financial market infrastructure for all companies offering these services,” the spokesman said.