More Competition in Australia’s Stock Market Seen With NSX Offer of Zero Application Fee

Stiffer competition is expected in Australia's stock market with the offer by the revitalised National Stock Exchange of Australia (NSX) to reduce broker application fees to zero. The new policy took effect on Jan 1, 2012, the same week that the NSX added 30 firms to its listing.

Emlyn Scott, chief executive officer of the NSX, said by bringing down to zero the broker application fee, more Australian Financial Services Licence holders could become NSX brokers which would mean more brokers could offer NSX-listed firms to more investors in the country and overseas.

It is also expected to challenge the listing supremacy of the Australian Stock Exchange (ASX) which charges $100,000 application fee, excluding set-up and other connectivity fees that jacks up the price of enlisting with ASX.

The ASX is ranked 12^th on the list of the top stock exchanges globally based on market capitalisation. As of end of 2010, the ASX had $1,454 billion market capitalisation and handled a trade value of $1,062 billion.

Number one of the list is the NYSE Euronext which has a market capitalisation of $15,970 billion and trade value of $19,813 billion for the same period.

"We are making NSX the best possible place for companies to list. The significant changes being implemented at NSX will position us as a listing venue of choice for companies. NSX's removal of broker application fees means brokers can connect to NSX more effectively than any other listing market in Australia," Ms Scott said in a statement.

With the addition of 30 new companies which migrated from the Bendigo Stock Exchange that NSX acquired in 2005, the latter is Australia's second largest listing stock exchange with 120 securities whose combined market capitalisation is more than $2.5 billion.

The zero application fee is also expected to boost the number of NSX current participating brokers at 18 and nominated adviser firms at 32.

On Oct 31, 2011, the Chi-X Global - backed by Japanese investment bank Nomura - also started to operate.

At about the same time, the Council of Financial Regulators proposed for the Australian Securities and Investments Commission (ASIC) to be given broader power to impose listing rules on the ASX and other operators to protect or enhance market integrity.

While ASIC Deputy Chairman Belinda Gibson was open to the agency being more powers, she was wary of the cost estimated by market players at $10 million amid pressures from the treasurer for the office to further cut cost as part of the federal government's aim to save $2.2 billion across the federal public service.

Although ASIC took over ASX's supervision of stockbrokers and investment bank trading, the ASX remains primarily responsible for enforcement of disclosure rule. However, with the entry of Chi-X and the growth of NSX, there are questions if the ASX would place competition ahead of its regulatory responsibilities.