Chi-X Global Inc.’s bid to challenge Australia’s main stock exchange operator ASX Ltd. has been held up as the company waits for the nation’s markets regulator to finalize new competition guidelines.
Chi-X Australia Pty, which planned to begin operating by March, says it’s now unable to give a specific start date until the Australian Securities & Investments Commission publishes a timetable to enable rivals such as Chi-X to compete with ASX. Chi-X received “in principle” approval from the government for a license in March 2010.
The process of introducing competition to the exchange market -- a key policy of Financial Services Minister Bill Shorten -- was held up by a general election in August that led to a minority government, prompting ASIC to assess the new administration’s commitment to earlier government proposals. The situation was further complicated in October when Singapore Exchange Ltd., which has agreed to start a dark pool with Chi-X Australia’s parent company, launched a takeover bid for ASX.
A dark pool is a private trading platform that doesn’t publicly display prices.
“We don’t yet have a date on when we might get a timetable,” Peter Fowler, Chi-X Australia’s chief operating officer, said in an e-mail to Bloomberg News. “We understand that ASIC, the Treasury and Minister Shorten’s office are all allocating a high priority to the matter.”
ASIC’s timetable is expected to outline key milestones, such as adoption of the new competition framework, the finalization of fresh market integrity rules, and the licensing of competitors.
ASIC released a consultation paper in November proposing a new framework for regulating Australia’s equity markets, in part to promote competition between exchanges. The consultation, which included submissions from ASX, was closed last month.
The consultation document proposed market integrity rules including an obligation on market participants to notify ASIC of “suspicious activity.” ASIC also proposed new transparency requirements for an environment where there are more exchange operators, as well as strategies to prevent extreme share-price movements.
“We are currently reviewing the submissions with the objective of releasing a timetable as soon as practicable,” Kyla Morgan, a spokeswoman for ASIC, said in an e-mail to Bloomberg News.
The minority Labor government, led by Prime Minister Julia Gillard, supports competition between financial markets in Australia, according to a statement from Shorten’s office.
“A final decision on the introduction of competition to the market will be made after the necessary regulatory framework is in place and the market is ready to operate in a competitive environment,” the statement said. “The government’s decision to support competition is a vital step in the development of Australia as a financial hub.”
Singapore Exchange offered to buy ASX on Oct. 25 for A$8.4 billion ($8.4 billion) in a cash and share deal that would create the world’s fifth-largest listed exchange company.
Singapore Exchange’s bid won the approval of the Australian Competition and Consumer Commission on Dec. 15, overcoming one of several hurdles to getting the go-ahead. It still needs the support of Treasurer Wayne Swan, the Foreign Investment Review Board, the Reserve Bank of Australia, ASIC, and parliamentarians, several of whom have opposed the sale.
The competition regulator, which examined the impact of Chi-X Global’s agreement with Singapore Exchange, said the merger wouldn’t adversely affect competition in the exchange industry, according to an ACCC statement.