ASX monopoly on financial markets to end with Cboe Australia nearing approval

The move to break up the ASX's 38-year monopoly will seek to lure billions to boost Labor’s clean energy, housing and tech agendas.

A historic shake-up of financial markets will end the ASX's monopoly.

Jim Chalmers’ historic move to end the Australian Securities Exchange’s monopoly will seek to woo billions of dollars from foreign investors and boost Anthony Albanese’s clean energy, housing and tech agendas, as the shake-up was labelled “bad, bad news” for the nation’s dominant bourse.

The corporate watchdog is in the final stages of considering ­listing a market application from Cboe Australia, amid a push to drive competition with the ASX, which was first established as the Australian Stock Exchange in 1987.

Following a high-level investor roundtable in Canberra hosted by the Treasurer on Wednesday, the Australian Securities & Investments Commission revealed it was close to finalising Cboe’s application, was expanding the list of approved foreign markets in Australia, and was exploring measures to streamline dual listing of foreign companies.

The Treasurer on Wednesday also accepted eight of nine recommendations from the Council of Financial Regulators, consisting of APRA, ASIC, the RBA and Treasury, designed to make small- and medium-sized banks more competitive.

The recommendations from the council’s small and medium banks review include measures to create greater competition and grow the lending pool outside the big four banks.

One of the nation’s most successful fund managers, Caledonia’s Will Vicars, was once the largest shareholder of the new Chicago-based sharemarket rival, and said the move would be a “kick up the arse” for the ASX. But he said that would depend on how much ­firepower Cboe could bring to the table.

“Cboe has been operating in the US which 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,” Mr Vicars said. “If Cboe get into equities and they have a proper go, then the ASX will have to have a proper go … they both lower costs for investors. It’s bad, bad news for the incumbent. They have been protected as a monopoly and they have not been in a dynamic competitive field.”

Mr Vicars said the “devil is in the detail” when it came to how this played out but if the two exchanges ended up not being interoperable – that is, investors being able to buy one stock on one exchange and selling it on the other – than there was “zero chance” the rival would have a lot of success.

The expected entry of a rival stock exchange comes after ASIC launched an inquiry in June over concerns about the ASX’s ability to “maintain stable, secure and resilient critical market infrastructure”.

Cboe Australia, which launched in 2011, is operating as an ASIC-regulated trading market operator providing thousands of investors with a “combination of world-class technology, innovation and cost-efficient product offerings”. Cboe already trades more than $1.5bn in cash equities, making up about 20 per cent of Australia’s equity trading volume.

After meeting investors who control about $3 trillion in private capital, Dr Chalmers said making Australia’s markets more competitive would “make our economy more prosperous and productive”. “If it goes ahead, this will mean more investment in Australian businesses and that means more jobs and opportunities for Australian workers,” Dr Chalmers said.

ASIC chairman Joe Longo said on Wednesday: “Our capital markets are healthy and strong but face intensifying global competition for capital and listings. As superannuation funds grow and investors seek opportunities, our actions will help keep our markets efficient, innovative and attractive, supporting economic growth for all Australians.”

In a statement, ASIC confirmed it was in the final stages of processing the Cboe Australia listing market application.

“This move is expected to enhance competition and attract foreign investment, providing more choice for investors and greater international alignment,” the statement said. “In parallel, ASIC is expanding the approved foreign markets to include Cboe’s US and Canadian exchanges, along with the Canadian Securities Exchange (CSE), prospective acquirer of the National Stock Exchange of Australia (NSX). This expansion will enable Australian investors to participate in certain transactions in these markets, further integrating Australia into the global financial system.”

ASIC was also “exploring measures to streamline dual listings of foreign companies in Australia and is actively considering other innovative applications to attract international businesses to Australia’s public markets”.

Former Manikay Partners chairman and exchange investor Russell Aboud said the plan was unlikely to make much difference.

“It’s understandable ASIC would do this, but I don’t think it will have much affect on the major issues in the Australian capital market which are liquidity and the diversity of listings,” Mr Aboud said. “But let’s see it play out. I would be surprised if another listing venue would materially change the landscape.”

The ASIC inquiry is probing ASX “governance, capability and risk management frameworks and practices across the group”.

“ASIC and the Reserve Bank of Australia have ongoing concerns over ASX’s ability to maintain stable, secure and resilient critical market infrastructure,” ASIC said on June 16.

At the time, Mr Longo said the inquiry followed “repeated and serious failures at ASX”.

“ASX is ubiquitous, you simply cannot buy and settle on the Australian public equities and futures markets without relying on ASX and its systems,” Mr Longo said.

ASIC’s ASX inquiry could recommend to the Albanese government that the exchange be broken up. The Australian Stock Exchange Limited was formed in 1987 after federal parliament passed legislation amalgamating six independent state-based stock exchanges. In 2006, the ASX merged with the Sydney Futures Exchange to become the Australian Securities Exchange.

As Dr Chalmers and the Prime Minister actively seek more foreign investment from North America and beyond to support their core priorities, the overhaul is intended to make it easier for Australian companies to access overseas markets and make the country a more attractive destination for international capital.

Investors who attended Dr Chalmers’ roundtable included the Association of Superannuation Funds of Australia, Blackstone, CDC Data Centres, the Customer Owned Banking Association, KKR, Super Members Council, the Tech Council of Australia and Telstra.

The roundtable discussions focused on “unlocking investment in data centre infrastructure and modernising regulation to unlock more investment capital”.

Dr Chalmers and the investment chiefs spoke about the role of data centre infrastructure in making Australians “the beneficiaries of AI technologies, and the potential to accelerate approvals for data centres that are aligned with the national interest”.

In his address to the roundtable, AustralianSuper chief executive Paul Schroder said: “All productivity increases must lead to prosperity … we need to grow the pie but also ensure it is sliced fairly. Achieving prosperity and building confidence places obligations on both the regulators and the regulated. We all need to focus on outcomes, not short-term actions.”

On artificial intelligence, Mr Schroder said: “We need to be sensitive to people’s legitimate fears and doubts – but we should not wait. Building data capacity and computing power is essential to data security, national security and diversifying the economy … With the right infrastructure, investment and attitude we could become a data superpower, driving performance, productivity and prosperity.”