ASX monopoly faces fresh attack from Cboe
Australian investors have good form when it comes to predicting the success of exchanges and the competition created by them.
Will Vicars, a top fund manager with Caledonia, was once the largest shareholder in Cboe. He knows that such a move might well be “a kick up the arse” for the ASX, but also a risk for Cboe.
“It’s bad, bad news for the incumbent. This is a big kick up arse They have been protected as a monopoly and they have not been in a dynamic competitive field,” Vicars says.
The competition will hopefully drive down prices for traders and investors all the way down to retail investors. But the risk is that such efforts fall flat.
Cboe has been operating in the US, which Vicars says is the most competitive market in the world for exchanges. “So it should have the liquidity which you will have to have to set up a new exchange,” he says.
Without liquidity and spreads the traders and investors and companies will obviously stay put. And if the two exchanges end up not being interoperable, then there is “zero chance” the rival would have a lot of success.
Vicars says it all comes down to the “devil in the detail”.
Competition is one thing but whether this helps fix other issues for investment markets, such as the drying up of new initial public offers is a whole new debate.
Former Manikay Partners chairman and exchange investor Russell Aboud says it’s unlikely to make much difference.
As US president Herbert Hoover once said: “Competition is not only the basis of protection to the consumer, but is the incentive to progress.”
Let’s see how much progress.
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A new rival to the Australian Securities Exchange will be seen at first glimpse as a coup for competition policy in Australia but if you ask the best investors in worldwide exchanges, it’s the devil in the detail that will determine the outcome for Australia’s capital markets.