ASX Cuts Interest-Rate Futures Clearing Fee as Competition GrowsAdam Haigh
ASX Ltd. cut fees for interest-rate derivatives and over-the-counter clearing in Australia as Asia’s second-largest exchange by market value faces competition from global clearinghouses.
Charges for customers using ASX Clear (Futures) will be determined by transaction volume, rewarding customers who trade more while removing a rebate based on growth of overall revenue, ASX said today in a statement. The changes would have lowered the bourse operator’s derivatives revenue in the 2014 fiscal year by about A$17 million ($16 million), it estimated. Derivatives are its biggest source of sales, accounting for about 32 percent of revenue in 2013.
Australia’s main exchange operator is expanding in other products as trading volume for cash equities stagnates. ASX Chief Executive Officer Elmer Funke Kupper last year led the firm to raise more than A$550 million to comply with new regulations for clearinghouse operators into global markets and as firms including LCH.Clearnet Group Ltd. look to compete for Australian business.
“Proactive moves on lowering fees help entrench the monopoly position,” Ross Curran, a Sydney-based analyst at Commonwealth Bank of Australia, said in a phone interview. “We would expect ASX’s very strong position in the Australian market place to stay fairly comfortably placed. It’s quite a significant drop in fees for that business.”
LCH, Europe’s largest clearinghouse that already clears over-the-counter interest-rate swaps for Australian banks, last month told the Australian government that competition in clearing of futures contracts and equities would stimulate innovation. Clearinghouses cut risk by collecting collateral to back each transaction, monitoring daily price moves and making traders put up more cash as losses occur.
The new fees will encourage volume growth and position ASX to compete for liquidity globally, according to today’s statement.
ASX in February 2013 won a battle to maintain its monopoly on the clearing and settlement of equity trades in the country for at least two years.