On September 6, Australia successfully enacted a new law aimed at fostering competition in post-trade settlement and clearing within financial markets. This legislation challenges the longstanding near-monopoly position held by ASX Ltd (ASX.AX).
The move comes in the wake of ASX’s decision to abandon an expensive overhaul of its trading platform, prompting the federal government to introduce measures aimed at opening up the market to other potential players.
The newly passed legislation, approved by the Senate on Wednesday, also grants enhanced authority to the Reserve Bank of Australia and the Australian Securities and Investments Commission (ASIC) to establish operational standards and intervene in pricing and access disputes.
Treasurer Jim Chalmers emphasized that this legislation “creates a framework for fair, transparent, and non-discriminatory access to market infrastructure for any emerging competitors, allowing them to offer their own clearing and settlement services.”
ASX has not yet commented on this development, and its shares experienced a 0.6% decline on Wednesday, in line with the broader market trends (.AXJO). It’s worth noting that the government had previously signaled its intentions to bring about these changes.
While Australian financial regulators have advocated for increased competition in clearing and settlement functions for years, a failed revamp of ASX’s comprehensive legacy software system added fresh momentum to calls from market participants for challenging its near-monopoly status.
In other major financial markets, the functions of clearing and settlement, including confirming stock ownership transfers and updating share registries, are typically managed by separate entities from the market operator.