ASIC flags possible changes to ASX composition

The Australian Securities Exchange (ASX) has been handed its report card for the tumultuous 2008 calendar year, with the corporate regulator finding 13 areas for improvement.

The Australia Securities and Investment Commission’s (ASIC's) report spans the year from January 1 to December 31, 2008, but also considers events that took place in the first half of this year.

Held within the report is an interesting recommendation from the regulator in regards to whether the business models of companies listed on the ASX be screened for inclusion, rather than on an individual basis.

“The volatile market conditions of the recent period have highlighted the question of whether entities with particular business models are suitable for listing on ASX’s market,” ASIC’s report stated.

ASIC suggested the ASX examine the current framework for the listing of entities and quotation of securities. The regulator said such a review should take into account the experiences during the volatile market conditions of 2008, “including issues such as illiquidity in the products of particular entities”.

It should also include a review of “future possible listing applications from entities in sectors that may be particularly affected by any ongoing economic downturn”.

Other areas noted for improvement by the regulator related to market surveillance, the growing use of algorithmic trading and direct market access in dealing on ASX group’s financial markets, and the ASX’s approach to quotation and supervision of trading in partly paid stocks.