Exchanges in Asia: Trends and perspectives
A speech by Tony D’Aloisio, Chairman, ASIC to the 2011 International Options Market Association and International Options Clearing Association Annual Conference (World Federation of Exchanges), 4 May 2011.
Note from the speaker: The views expressed are my views and not the views of ASIC or the Australian Government. I acknowledge and thank McKinsey & Company for allowing me to use a number of their slides in this paper.
The way I will approach this topic is to make three key points and then develop three scenarios and, in that way, identify the key issues the exchange industry faces and will face over the next three to five years in Asia.
From that analysis, the key takeout I will respectfully leave with you (for your assessment) is that the exchange industry in Asia is now at an important point in its development. It has the opportunity to make the most of the growth opportunities outlined and to learn from developments in Europe and in the United States, but to take advantage of that opportunity it will require a close dialogue and close cooperation within each jurisdiction and regionally between: the operators of the exchanges, be they incumbents or new entrants; and the rule makers for exchanges, be they policy makers or regulators.
This close dialogue and cooperation will need to be more than the usual consultation and sounding out that jurisdictions may make for other industries. This is because the exchange industry is different—it is a vital part of the financial system and infrastructure of each economy and, as a result, it is highly regulated. What is more, some of that regulation is provided by the exchanges themselves. This close dialogue and cooperation will need to play out at a local as well as a regional level. The need at the local level is clear, but regionally it is important as well. The global nature of financial markets, the potential cross-border systemic issues that we saw during the global financial crisis (GFC), and the need for regulators and policy makers to have confidence in market integrity issues when, for example, it comes to assessing such matters as cross-border listings and cross-border consolidations.
So my suggested takeout for you is not a solution but a process—an important process that will involve a close dialogue and cooperation between the incumbents and new entrants, and policy makers and regulators. In my view, this close dialogue and cooperation, if given the necessary priority by those involved, will lead to a possible blueprint for handling the many issues (which I will talk about shortly) that are confronting the industry and, in doing so, provide practical guidance for policy makers and regulators, and incumbents and new entrants; for example, for assessing new forms of trading, the entry of new players and potential cross-border consolidations.
Such a blueprint should lead to a clearer evolution of Asian exchanges to a position of sustained strength that allows innovation and progress to meet the needs of this growing and dynamic region. Without such a blueprint, the exchanges in Asia could be at risk in not making the most of the available opportunities.