Government announces it will intervene in the ASX monopoly and hand regulators more powers

Under its proposal the government would hand the RBA, ASIC, and the ACCC significant powers to intervene in the ASX.

The government wants to hand the RBA ASIC, and the ACCC significant powers to intervene in the ASX. Picture: Gaye Gerard

The federal government will wade into the Australian Securities Exchange’s monopoly, announcing plans that would hand great powers to intervene in disputes around the pricing and operation of financial markets to regulators.

The Albanese government on Thursday announced it would intervene in the trading and clearing operation as part of a major shake-up of Australia’s financial system.

Treasurer Jim Chalmers said draft legislation was aimed at “providing emerging competitors fair, transparent, and non-discriminatory access to market infrastructure”.

“These reforms are all about ensuring we have a competitive financial system that works for consumers, businesses and investors – and that delivers for the Australian economy and the Australian people,” he said.

Dr Chalmers said he had directed Treasury to run a consultation process for the draft legislation which explores expanding competition in the provision of clearing and settlement services in Australia’s financial markets.

The proposed legislation would come as a significant challenge to the near monopoly of the ASX in Australia’s financial markets.

Dr Chalmers said the proposed new powers would help “improve safeguards in our financial markets and stopping existing providers using their market dominance to prevent competition”.

In addition to the ASX, Australia’s financial markets also have trading minnows the Cboe and the National Stock Exchange, which between them cover a small slice of the trading landscape.

The draft notes that although the Corporations Act permits more than one CS facility to handle clearing and settlement of transactions executed on one financial market, the current market structure was a monopoly where the ASX was the sole provider of cash equity CS facility services.

“The current regulatory settings for CS facilities in the Australian cash equity market, while reflecting an openness to competition, lack mechanisms to facilitate competitive outcomes,” the paper notes.

Jim Chalmers has started consultations for a Bill which would reduce the ASX’s monopoly powers. Picture: Gary Ramage

Dr Chalmers said the proposed changes to market regulation represented proposals put forward in 2012 and 2015 to amend multiple pieces of legislation.

The draft legislation would hand the Australian Securities and Investments Commission and the Reserve Bank powers to implement and enforce requirements for the ASX to “operate in a way that achieves competitive outcomes, and ensure safe and effective competition in clearing and/or settlement should a competitor emerge”.

The draft notes ASIC would be given powers only to make rules that deal with the activities, conduct, or governance of CS facility licensees if the entities were covered by a determination made by the minister.

“It is expected that the rule-making power will initially cover cash equities with the flexibility to expand to other financial products if the need arises in the future,” the paper notes.

ASIC would also be required to establish a compliance and enforcement regime for its new rules, including making civil penalties or enforceable undertakings.

The Australian Competition and Consumer Commission would also be given powers to arbitrate disputes between parties around the price and access to clearing and settlement services.

An ASX spokeswoman said it welcomed the opportunity to “work through the detail” of the reforms proposed by Dr Chalmers “with the government and the relevant regulatory agencies”.

“ASX is open to ensuring there is a clear regulatory structure in place to provide competition in clearing and settlement services, and supportive of strong regulatory oversight of critical financial market infrastructure for all of the entities that provide these services,” she said.

The ASX has copped significant criticism in recent months after terminating its CHESS replacement program and booking a $250m writedown.