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17-283MR ASIC reports on National Stock Exchange’s listing standards
ASIC has today released its assessment report on the listing standards of the National Stock Exchange of Australia Limited (NSX).
The report concludes that NSX should make a number of changes to improve compliance with its statutory obligations.
NSX, and its parent company National Stock Exchange Limited, have agreed to a number of actions designed to ensure that:
- persons that can influence NSX are of good repute, are sufficiently knowledgeable and will act in the best interests of the NSX market as well as the wider Australian market
- the NSX market attracts issuers with legitimate motives and connection to Australia and ensures listings occur under Australian-regulated disclosure documents, and
- the NSX market operates with integrity and its users are informed.
These actions also address serious questions about the rationale for some foreign listings on NSX.
ASIC Commissioner Cathie Armour said, ‘Listing standards are critical to the integrity of the Australian equities market, and the trust and confidence investors have in it. As one of only a small number of domestic listing markets, NSX has an important role to play in upholding standards expected of listing markets in Australia’.
The assessment also identified that some listings had a disproportionately large amount of trades occurring off-market following very thin trading on NSX. This activity is likely not unique to NSX so ASIC will separately conduct a wider market review across all Australian equity markets.
Ms Armour said, ‘This review may lead to additional expectations for market operators to deter this activity and to maintain the integrity, quality and strong international reputation of the Australian financial system’.
ASIC will continue to closely monitor NSX’s listing arrangements. NSX has agreed to update ASIC by 31 October 2017 on its progress in addressing the agreed actions and to engage a third party to report on its implementation of the agreed actions to ASIC by 31 March 2018.
The report drew on materials, analysis and research over the period 1 July 2013 to 8 August 2016, and subsequent discussions with NSX on a range of related matters.
Under the Corporations Act, ASIC may assess how well a licensed market operator is complying with any or all of its obligations. This was previously tested by way of an annual assessment against a wide set of prescribed obligations. However, due to a change in regulations, ASIC can now more effectively target specific areas relevant to the operation of the market.
This is the third assessment arising from ASIC’s targeted assessment of listing standards across Australian listing markets. See also our assessment reports of Australian Securities Exchange (Report 480 Assessment of ASX Limited’s listing standards for equities (REP 480)) and Sydney Stock Exchange (Report 518 Assessment of Sydney Stock Exchange Limited’s listing standards (REP 518)).
In this report, we assessed the extent to which NSX had in place adequate arrangements to operate its listing market, with a specific focus on NSX’s:
- governance, including resources to implement its conflict handling measures and arrangements for persons of influence
- commercial and regulatory strategy for its listing functions, including in relation to the suitability of companies for listing to ensure a fair, orderly and transparent market, and
- NSX’s monitoring and enforcing of compliance with its listing rules.