Australia Revises Guidelines for Equities Clearing, Settlement

  • Minimum conditions for clearing license set out by regulator
  • ASX updates its code of practice on post-trade services

Australia’s government announced steps to break down ASX Ltd.’s monopoly of clearing and settlement of stock transactions and in return said it would make it easier for the exchange to raise capital.

Treasurer Scott Morrison commented Wednesday as the Council of Financial Regulators set out the minimum conditions required to obtain a license to clear equity trades. ASX, the country’s main stock and derivatives exchange operator and sole provider of cash equities clearing and settlement, shouldn’t raise barriers to any potential competitor in the design of its technology infrastructure, the CFR said.

The reforms “demonstrate our commitment to open and competitive markets, which are fundamental to a vibrant, modern, world-leading economy,” Morrison said in an e-mailed statement. The government will legislate to underpin the recommendations.

The government is building on a policy outlined in March when it said it will end ASX’s monopoly on equities clearing in Asia’s sixth-largest stock market, while also loosening ownership restrictions on the bourse operator.

“Recognizing the place of ASX in a more competitive environment” the government will amend restrictions in the Corporations Act to allow the exchange “more flexibility in raising capital,” Morrison said.

ASX, which has cut its fees on clearing and settlement of equity trades, said in a separate statement Wednesday it had updated its code of practice on so-called post-trade services to comply. The company already competes in trading with Chi-X Australia Pty, which has protested the clearing monopoly and lobbied regulators to change the system.

ASX said it is committed to ensuring Australia’s clearing and settlement infrastructure is efficient, well capitalized and well regulated. The exchange will commission an annual independent audit of its governance, pricing and access arrangements and release the results of the audit on its website at the same time as it releases its full-year financial results, beginning in August 2017, it said.

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