ASX drops FundConnect project
TheAustralian Stock Exchange(ASX) has dropped its plans to develop FundConnect, its version of a managed funds transaction hub, saying the return on investment was uncertain and it was not prepared to face that risk.
The decision has cost the ASX about $3.5 million after tax for work it has already done since mid 2001 when it indicated it would become involved in the creation of a transaction hub.
ASX deputy managing director Angus Richards says the decision to drop the project totally was based on the issue of how long it would take for any hub to reach a critical mass.
He says this issue was the “great imponderable” and the ASX was not prepared to risk unknown costs while waiting for a commercial return.
Despite withdrawing from the provision of a hub, Richards says there is still a core need for such a vehicle and believes the three remaining hub providers —IWL, Ausmaq and Investmentlink — will also face issues in building critical mass in the market.
“Four players was really too many, but so is three and they each have to deal with issues of lead time as they seek to gain critical mass,” Richards says.
He says this will become even more difficult as platforms take on more of the managed funds administration role, which was another reason for the ASX to step away from the project.
In addition, FundConnect project director Mark Spiers, who was brought on board to manage the project in March 2002, will also conclude his involvement with the project from the start of June but has not indicated what his next role in the industry will be.
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Jason Spits
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