ASX will keep clearing monopoly

THE major stockbroking houses have said they still want competition introduced in clearing and settlements so that prices come down, as the dominant exchange operator was given a reprieve on moves to open up the lucrative clearing business to competition.

The federal Treasurer, Wayne Swan, said on Monday he had accepted advice from the Council of Financial Regulators to delay by two years a decision on whether to introduce competition in the clearing and settlement of the Australian equity market.

While it was expected that competition would deliver net benefits to market participants, now was not the time to do so, Mr Swan said.

The ASX would instead be required to adopt a code of practice in the next six months to minimise any negative consequences from its monopoly, with the code to be reviewed after two years.

It would also have to publish detailed statements of its equity clearing and settlement services.

A report by the Council of Financial Regulators said while many stakeholders agreed competition for the clearing of equities could be expected to deliver benefits, "there was scepticism around whether those benefits would outweigh any associated costs".

Deutsche Bank analyst Kieren Chidgey said the decision could be "chalked up as a win" for the ASX but it was unlikely to deliver a large boost in profits to the firm. He also said that the reprieve could prove to be temporary.

"Should ASX's equity clearing monopoly be preserved in two years' time, when the issue is revisited, there remains the risk of greater regulatory intervention, which could impact control or pricing," he said.

But the chief executive of the ASX, Elmer Funke Kupper, welcomed the decision.

"ASX will work with industry stakeholders to develop a code of practice for its clearing and settlement services and is committed to deliver a world-class financial infrastructure for Australia," he said.

Chi-X Australia, the only rival to the ASX, which spent much of last year arguing for the need to introduce competition in clearing and settlement, did not comment.

Commonwealth Bank analyst Ross Curran said the decision was a "very good one" for ASX shareholders because it allowed the monopoly position on clearing and settlement to remain intact.

The Council of Financial Regulators is the co-ordinating body for the country's main financial regulatory agencies. Its members include the Reserve Bank, the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the federal Treasury.

Adele Ferguson— Page 5