In a submission to the corporate regulator’s evolving capital markets consultation, the ASX said the downward trend in listings is cyclical rather than structural but stressed that now is the right time to review and modernise market settings.
The ASX stressed that due to the increasing “interconnectedness” between public and private markets, both Australian retail and institutional investors would benefit from regulatory frameworks that promote public listings and regulations that enhance stability and transparency in private markets.
Key among the ASX’s proposals is a push to streamline the IPO process, including shortening the regulated “on-risk” period for investors and companies.
It also called for reforms to the prospectus regime, advocating for the option to omit financial forecasts in new listings, which it argued would provide companies with greater flexibility and reduce liability concerns.
To attract more founder-led businesses, the ASX urged a reduction in the minimum required “free float” – the percentage of shares made available to the public – for both initial listings and inclusion in benchmark indices such as the S&P/ASX 200.
The submission also flagged opportunities to make the corporate bond market more efficient and accessible to retail investors and recommended easing the size thresholds for foreign exempt listings to encourage more secondary listings from international companies.
ASX general manager of listings, James Posnett, said the proposals aim to reinforce the role of public markets in driving economic growth and wealth creation.
“Listed markets are crucial to the Australian economy,” Posnett said. “They provide access to growth capital for our businesses and support the democratisation of wealth creation by opening access to investment opportunities for all types of investors.”
The exchange also urged further public debate on dual class share structures following moves in several countries, including the UK, Singapore, China and Hong Kong, to change regulatory settings to allow or facilitate dual-class share listings.
Posnett said that global competition for listings had intensified, particularly as private capital expands and other jurisdictions liberalise their listing regimes.
“It is vital our listed markets remain globally competitive – and a missed opportunity for investors and our economy if Australian companies choose to list offshore,” he said.
Regarding private markets, the ASX said the challenge lies in enacting regulation that is “proportionate”, fostering capital formation while managing systemic risks that could impact the broader economy.
On the debate of whether public and private markets should be regulated similarly, the ASX acknowledged that a higher level of regulation and disclosure obligations is warranted for listed entities to ensure good governance, given the widespread ownership of public companies.
“There are strong reasons to regulate private and public markets differently, and benefits in retaining a distinction between the two. However, the regulation that applies to private markets should appropriately reflect the level of risk that these entities pose to the financial system, the broader economy, and to investors,” the markets regulator said.
In considering the appropriate level of regulation and disclosure for unlisted entities, the ASX advised regulators to take into account the systemic risks arising from the interconnectedness of markets.
“An appropriate level of transparency would allow regulators and government to understand the risks presented in these markets. Greater understanding of these risks could enhance risk management, reduce the risk of systemic shocks and ultimately lead to more informed policy settings,” it said.
“An appropriate balance would need to be struck between addressing the risks posed by large private entities and imposing increased regulatory burden, taking into account the nature of the entities being regulated.”
