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The ASX loses its monopoly on share clearing and its shares jump

Inside the ASX data centre. Image: Chris Pash.

The ASX is losing its monopoly on share clearing, the backroom process of making sure the money from share trades goes to the right people.

A short time ago, ASX shares were up 1.5% to $41.37.

The federal government today announced a reform package that opens the door to competition in the clearing of cash equities, acting on the recommendations of the Council of Financial Regulators’ (CFR) Review of Competition in Clearing Australian Cash Equities.

Scott Morrison says the opening up of competition in the clearing of cash equities is in line with the government’s commitment to competition law reform.

“As Treasurer I want to help create an environment where our financial services sector can be both internationally competitive and play a central role in aiding the positive transition of our economy,” he says.

Currently the ASX does clearing for both its own exchange and for its competitor, Chi-X.

However, it may be some time before another clearance house is established. As yet, there is no emerging competitor and the ASX remains the only clearing house.

The treasurer also announced a relaxing of ownership restrictions on the ASX, to allow it to be more flexibility in raising capital.

The government will amend the ASX ownership restrictions in the Corporations Act to make them consistent with other financial sector companies such as banks and insurance companies.

There will be a 15% maximum holding rule but, under the new rules, the treasurer will be able to grant an exemption.

The ASX has welcomed the announcements.

“These are sensible decisions and in the best interests of Australia’s financial markets,” says ASX executive chairman Rick Holliday-Smith.

“Applying the same 15% ownership limit to ASX as banks and insurance companies with the Treasurer retaining the power to act in the national interest puts ASX on a level playing field with other financial institutions.”

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