THE controversial Singaporean bid for the ASX has prompted market discussion about an alternative Perth exchange proposed by a financial services industry group.
THE controversial Singaporean bid for the ASX has prompted market discussion about an alternative Perth exchange proposed by a financial services industry group.
The Perth-based Australian Financial Services and Securities Dealers Association is touting the rival exchange, initially aiming to open when the Sydney-based ASX closes, because its members believe that there is not enough competition in the market place.
AFSSDA managing director Jamie Coote said that the Singapore Stock Exchange’s bid for the ASX had highlighted the monopoly nature of the Australian market.
Mr Coote said the association had about 50 members that were mostly WA-based corporate advisory firms without stockbroking capacity in their own right.
He said AFSSDA members listed 40 companies in the past year, raising about $2 billion.
However, Mr Coote said that volume was not enough to underwrite a new exchange despite the desire of many members to see better competition in the market.
He said the association was seeking about 200 of the best Australian Financial Services Licence holders across the country as a base membership to provide the volume of business required form a sustainable exchange.
The concept was probably somewhere between two and five years from fruition but could occur earlier if a deal was done with an existing alternative Australia exchange, such as the NSX, or a credible large scale financial services group, like a large clearing house.
Any new initiative had to meet the same levels of market integrity that Australian investors already enjoyed.
“Australia has an extremely good sovereign risk profile for a reason,” Mr Coote said.
“You can’t introduce an exchange without taking those things into consideration.
“But why support a monopoly in financial services? So long as the integrity is there then exchange competition is good for product innovation and service.”
Mr Coote said the initial proposal was for an exchange that provided an alternative market for current ASX-listed stocks, trading between 1pm and 7pm Western Standard Time, which would extend the trading window for local brokers and make the stocks more accessible for Asian and European investors.
Trade in WA’s resources stocks would be a clear emphasis for such an exchange.
“Historically, if you talk to the guys who used to run the ASX in Perth before it was sucked into the mother ship, their volumes used to increase massively when the east coast markets shut.”
The AFSSDA estimates it would cost about $2 million over two years to win a licence to operate an exchange and then between $5 million and $20 million in set up costs, depending on the level of software sophistication required.
