ASX Ltd., the operator of Australia’s main stock exchange, dropped the most in 2 1/2 years amid a A$553 million ($530 million) capital raising to ensure its clearing business complies with new regulations.
The exchange raised A$267 million selling shares to institutional investors and intends to raise a further A$286 million from individual investors, the company said in a statement today. Its stock fell 6.1 percent to A$33.15 at the close in Sydney, the biggest decline since Oct. 26, 2010, compared with the offer price of A$30 per share.
ASX Chief Executive Officer Elmer Funke Kupper is expanding the exchange’s over-the-counter clearing service for interest-rate swaps and has cut fees to fend off competition in stock trading from Chi-X Australia Pty and dark-pool operators. The company will use the funds to pay down A$250 million of debt and will use A$200 million to comply with stricter rules expected to be required for its clearing business.
“Risk to equity holders’ returns has increased,” said Arvid Streimann, a Sydney-based analyst at Morgan Stanley, in a report yesterday. “The catalyst for the capital raising was greater clarity on the likely capital requirements from European regulators.”
The Group of 20 nations has ordered a global overhaul of rules governing derivatives contracts, mandating the use of central-clearing parties by traders. Regulators have sought tougher rules for over-the-counter derivatives since the collapse of Lehman Brothers Holdings Inc. and the rescue of American International Group Inc., two of the largest traders of credit-default swaps.
Clearinghouses stand between buyers and sellers to reduce the risk of default. Derivatives comprise 32 percent of ASX sales, the largest component, and the exchange must apply by mid-September to the European Securities and Markets Authority to be able to continue servicing European-based clearing participants.
“ASX expects that its clearing houses will be sufficiently capitalized to satisfy reasonably foreseeable market growth and regulatory outcomes,” according to a statement from the Sydney-based company June 11. This “positions ASX for growth in both over-the-counter clearing and futures clearing against an emerging international regulatory agenda.”
The retail offer is scheduled to begin June 17 and close at 5 p.m. in Sydney on July 5, ASX said in a statement today. ASX will announce full-year earnings on Aug. 22.