Clearing and Settlement of Cash Equities in Australia

International Cost Comparisons

In the Code of Practice for Clearing and Settlement of Cash Equities in Australia (Code of Practice), ASX committed to commission from an independent consulting firm an international cost comparison of cash market clearing and settlement services.

ASX Clear and ASX Settlement commissioned Oxera, a leading independent European economics consultancy, to benchmark the costs of using ASX’s cash equity post-trading (clearing and settlement) services against the costs of using the services provided by financial market infrastructure providers (FMIs) in other financial centres.  On 23 June 2014, ASX released the Oxera Global Cost Benchmarking of Cash Equity Clearing and Settlement Services report.

The Oxera report concludes that “the costs of post-trading services in Australia are in line with the costs of similar services provided in financial centres of comparable size.”

The figure below presents the cost of post-trading services provided by each FMI to a typical Australian institutional investor relative to the total value of trades cleared and settled by the associated trading platform.

 

Oxera’s comprehensive cost benchmarking confirms the analysis by the Council of Financial Regulators (CFR) that “ASX’s fees are broadly comparable to those of other markets of a similar scale”, which was published in its December 2012 report Competition in Clearing Australian Cash Equities: Conclusions.

The Oxera report acknowledges that there is a high level of transparency around the pricing, financial performance and international benchmarking of ASX’s cash equity market post-trade services.  This transparency has been provided by ASX under the Code of Practice framework.

ASX consulted the Forum and the Business Committee, advisory forums established under the Code of Practice, on the scope and methodology of the benchmarking analysis prior to the work being commissioned.  The Business Committee was consulted during the project on some of the key elements of the user-profile analysis.

Oxera also directly contacted some members of the Business Committee to discuss their perspectives on the services and fees included on the comparison.  Oxera’s discussions with participants assisted in validating a number of assumptions in the analysis.  All providers of financial market infrastructure (clearing and settlement services) included in the benchmarking analysis were also contacted by Oxera to confirm their understanding of fees and services provided in each jurisdiction.

Oxera is an acknowledged expert in this area having previously prepared reports using the same methodology for Euroclear (2010), the European Commission (2011) and the Brazilian Securities and Exchange Commission (2012).

The June 2014 Oxera report is available here.  Oxera presented their findings on the benchmarking analysis to the Forum on 23 June 2014.  A copy of the presentation is available here.

2013 International Comparison

Ahead of the commencement of the Code of Practice in August 2013, ASX commissioned Oxera to update its earlier analysis, which was presented in the CFR December 2012 report.  The note prepared for ASX by Oxera in April 2013 updated the results from its earlier analysis in 2012 using international pricing schedules from early 2013 and by incorporating user/intermediary profiles that are more representative of the Australian market.  This note prepared by Oxera  can be viewed here.