ASX keeps clearing in lieu of better idea
ASX Limited will not give up its monopoly in share clearing, arguing that it would too difficult and probably ineffective.
ASX Limited chief Elmer Funke Kupper says he will make the claim at an upcoming review by the Council of Financial Regulators (CFR).
The Council is looking at lifting a moratorium on competition next week.
“Under the [ASX Code of Practice introduced in October 2013] the pressure on us to do the right thing is high,” he said.
“Prices are only going to go one way.”
Clearing and settlement has been removed from a big upcoming overhaul of all the exchange's systems, which was announced at its half-year results this week.
It is understood that uncertainty about clearing was the reason for its exclusion.
Kupper warns that if the CFR's review leads to a new market structure, the upgrade could take much longer.
But Asia-Pacific Exchange – one of the main groups using ASX’s clearing and settlement services - argues that clearing should either be opened to competition or carved out of the ASX and put into a non-commercial utility, like the US has.
But the ASX box says this only works in big markets like Europe’s, but completion has been ineffective in smaller ones like Australia.
Kupper claims the claimed the returns from clearing are so low that “it actually operates in some ways like a private utility already”.
“What is the problem we are trying to solve here?” he asked.
“You would think about [creating a separate utility]if you believe that in someone else's ownership fees might be lower, for reasons that I can't quite understand.”