04 Apr 2011

ASX Equity Markets Review - maybe Western Australia is special, after all

The Australian Securities Exchange (ASX) has commenced a review of the small and medium enterprise, mid-cap and micro-cap equity markets, aimed at, amongst other things, better meeting the needs of issuers and investors based in Western Australia.

The review commenced in January 2011, with a comprehensive analysis of the ASX market. ASX is now inviting market users to provide feedback on a number of issues.

Market Analysis

ASX faces an ongoing challenge of how to best meet the needs of its diverse stakeholders, which is characterised by a relatively small number of very large companies, and a large number of small and medium enterprise, mid-cap and micro-cap companies.

There is significant diversity among the more than 2,000 entities listed on ASX, which is the focus of its review. The diversity extends to attributes of the company itself (eg. industry sector, stage of corporate life-cycle, market capitalisation and profitability) and attributes of trading in the company's securities (eg. liquidity, value traded, frequency of trading and share prices).

A State-based analysis indicates that WA has the largest number of ASX listings (more than 800), accounting for around 37% of total listings. Resource listings typically choose to list via ASX's Perth office, with around 75% of all WA-based listings from the metals and mining and energy industry sectors.

Initiatives to be considered

Following a review in 2005, ASX expanded its investor relations products and services, and is planning to release a number of other initiatives in 2011 which focus on assisting smaller companies to raise their profile in the investment community, thereby enhancing trading liquidity, access to capital and market valuation. ASX will also release a JORC code and ASX listing rule review discussion paper, and a hydrocarbon reporting requirements and standards consultation paper, in mid-2011.

In the process of this review, ASX will consider changes to a wide range of issues, including trading hours, admission and ongoing rule obligations (eg. shareholder spread requirements), and different ways to optimise trading volumes.

ASX will also look to overseas exchanges for possible further initiatives, potentially resulting in differentiated admission, capital raising, disclosure and reporting requirements, including:

  • segmenting by liquidity within a single market structure – eg. Deutsche Borse;
  • growth of OTC markets to cater for unlisted companies – eg. Pink OTC Markets in the United States; and
  • second board markets – eg. UK (AIM), Hong Kong (GEM), Canada (TSX-V), South Africa (AltX) (NB. introduced in the Australia in 1984, second board markets suffered from lack of liquidity after the 1987 share market crash and closed in June 1992).


ASX invites feedback on the following questions and on any other issues thought relevant to ASX's review:

  • Are there particular industry sectors that would benefit from segmentation, either in the form of different listing rules, trading functionality, different market models, or some other targeted ASX services?
  • What could ASX do differently to better meet the needs of start-up or exploration companies, and intermediaries and investors in these companies? How can ASX best support and promote junior exploration companies?
  • What could ASX do differently to better meet the needs of WA-based companies? Are there key features or characteristics of WA-based entities which could form the basis of market segmentation?
  • What are the benefits of tailoring listing and trading requirements for different segments of the market within the single market structure?
  • What are the benefits of introducing a new market(s) tailored to the needs of specific listed entities? What are the difficulties that this poses?

After considering feedback from market users, and engaging with key stakeholders, ASX will develop a series of recommendations prior to releasing for public comment details of any proposed listing and trading rule changes, details of enhancements to trade functionality and any other key changes.

ASX has requested feedback by Friday 20 May 2011. Clayton Utz would be delighted to provide further information regarding the ASX review, or assist with any submissions that may be made to ASX.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.