Federal government launches measures to curb ASX domination

The Albanese government is launching a broadside at the ASX through a plan to strengthen financial market infrastructure.

Treasurer Jim Chalmers said the reforms were aimed at ensuring Australia’s financial system was stronger and more secure. Picture: NewsWire / Monique Harmer

The Albanese government is launching a broadside at the ASX through a plan to strengthen financial market infrastructure, including giving the Reserve Bank and other regulators more powers and injecting further competition in clearing and settlement.

Acting on recommendations by the Council of Financial Regulators, the government is pushing forward with a spate of measures including providing the RBA with powers to intervene and resolve a crisis at a domestic clearing and settlement facility.

The government will also outline on Wednesday plans to introduce legislation to boost competitive outcomes, where the ASX has a near monopoly in clearing and settlement, delivering the competition and corporate regulators additional powers. It wants more competition in the clearing and settlement of cash equities trades, following a turbulent operational period for the ASX.

Under the plan, the Australian Securities and Investments Commission with ministerial approval could act to institute rules around competition, spanning areas such as pricing, market access, governance and interoperability.

The measures are aimed at setting “minimum, enforceable conditions” to ensure a competitive environment for clearing and settlement. The ASX’s disastrous blockchain-based project – which would have replaced the an ageing exchange system that manages the settlement of share transactions and records holdings – was dumped in November, after being riddled by delays and issues.

In a market update last month, the ASX said it would reassess all aspects of the CHESS replacement project and write off $250m following a damning review of it by Accenture.

The RBA and ASIC at the time delivered scathing assessments of how the ASX handled the critical CHESS replacement program.

Jim Chalmers will on Wednesday say the finance sector requires a new regulatory approach as it navigates constant change.

“It’s fast moving, dynamic and our regulatory frameworks haven’t kept up. Our reforms are about starting to fix that in pursuit of a financial system that is stronger and more secure,” the Treasurer will add. “The digital age has brought new opportunities and risks to finance. Our plan is about opening up space for further innovation while making sure we have the right regulatory approach in place to keep consumers, businesses and the system, safe.”

He will also take a swipe at the prior Coalition government saying it had reneged on implementing recommendations by the CFR.

Last year, the Morrison government outlined that the RBA would have access to a new $5bn last-resort facility to manage any fallout from cyber attacks or financial shocks to a stock exchange or clearing house. That followed an embarrassing ASX technology outage in late 2020, that crippled the exchange’s trading platform. At the time, questions were asked about why more trades were not redirected to alternative exchange Chi-X, while the ASX was offline.

The latest set of sweeping reforms are also targeted at strengthening regulators’ licensing, supervisory, and enforcement powers with regards to financial market infrastructure, which the government says will reduce the likelihood of a crisis occurring.

Financial Services Minister Stephen Jones will say: “Australia punches above its weight in the fintech world. The government wants this to continue and to establish regulatory settings which foster innovation, new businesses and provides consumer safeguards.” The measures also point to the government releasing a strategic blueprint for the nation’s payments system in the first quarter of next year, following a consultation paper being made public on Wednesday.

As well as the strategic plan, the government will flag its intention to update legislation to ensure the RBA has “the ability to regulate new and emerging payment systems, such as digital wallet providers”. The government will also continue to work with the RBA on assessing an Australian central bank digital currency.

Consultation is slated on a new ministerial designation power to boost oversight by relevant regulators for payments services or platforms that “present risks of national significance” and on a new payments licensing framework.

It’s a long list of regulatory priorities for the government and also comes as it gauges how to bring the buy now, pay later sector within its regulatory net.

In addition, Wednesday’s release will flag the government’s next steps on licensing and regulation of crypto service providers.

That’s in the wake of the collapse of FTX, one of the world’s largest exchanges, which sparked angst and knock-on effects across the sector. The government will release a consultation paper in early 2023 on which digital assets should be regulated.