ASX welcomes competition as regulatory issues persist

By Scott Murdoch

Australian Securities Exchange ASX Chief Executive Helen Lofthouse said on Tuesday she welcomed competition in the sector but said there were benefits to having one "marketplace" for equities trading, especially in price discovery.

Australian regulators last week approved a bid by Cboe Australia, the local unit of the Chicago-headquartered exchange operator, to list new companies on its boards, ultimately providing direct competition to the ASX as a listing venue.

The ASX has been under regulatory pressure for a number of failures in the past few years, primarily for equity trading settlement delays and slow technology upgrades.

The Reserve Bank of Australia in September criticised the ASX and said it must make "foundational changes" to its governance, culture and risk management after last year's trading settlement failure.

Lofthouse told a Citigroup conference in Sydney on Tuesday that competition to the ASX could prove beneficial if it allowed markets to grow and be more vibrant.

But she warned equity price discovery processes and transparency could be fractured with more than one major exchange operator.

"If you have one marketplace where everyone comes for that price discovery, that is helpful for price transparency or you're looking at settlement system, there are benefits for customers if everyone is using the one settlement system," she said

"That is the core challenge in the financial market infrastructure, space, it's balancing the network benefits from one provider with the competitive benefits you get from multiple providers."

ASX's regulatory woes has weighed down the company's stock price, with shares down 11.62% so far this year. The benchmark S&P/ASX200 is up about 9%.

The exchange also came under fire earlier this year after James Hardie said it had received an ASX waiver that meant it did not need to seek its own shareholder approval to go ahead with the $8.75 billion cash and stock purchase of U.S builder AZEK.

Typically, companies issuing new shares worth more than 15% of its existing equity capital to fund an acquisition would need a shareholder vote but the ASX has the power to waive that requirement.

The ASX has said it would review listing rules around that shareholder vote requirement and Lofthouse said the ASX was calling for submissions on a consultation paper that would be prepared.

"It's very understandable that investors want more control particularly in those companies making decisions they might not support but we need to be mindful about the vibrancy of public listed markets," Lofthouse said.

"Companies have choices where to raise capital, there's listed markets all around the world and private capital options."