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Wednesday, 25 February 1987
Page: 688

Mr SNOW(12.41) —The securities industry has had many of its shackles broken with rapid deregulation and technological advance, and the boards of the six capital city stock exchanges have found it easier to come together under a single body. A new national exchange will be able to handle all the trading now conducted on the six independent exchanges. I believe the figure was about $22 billion in 1985. Many people not in the industry do not realise that the Australian broking industry is very much involved with competition on international markets, with London being one of the main threats, if one could call it that. There are quite a lot of Australian companies listed on the London market, and it is good that honourable members on both sides of the House have made it clear that a very important purpose of the Australian Stock Exchange and National Guarantee Fund Bill, perhaps its main purpose, is to get the stock exchanges' house in order to meet international challenges.

A number of reasons have been put up by the Australian Associated Stock Exchanges in support of the restructuring of the stock exchange. Most importantly, it is illogical to have one central market, to which every member organisation belongs and with which they all deal, governed by six bodies whose only claim today for separate sovereignty is really geographic. At present there is no generally recognised single policy making body within the industry. There is a lack of discipline in the manner in which the industry is directed, although I would say that the Australian associated stock exchanges have been performing functions such as policy formulation and discipline. It is simply that the exchanges form a loose-knit group. The present system was devised for a different era when stock exchange policies were geared to maintain exclusive benefits for members. Also, as the Attorney-General (Mr Lionel Bowen) said in his second reading speech and as other honourable members have said, internationalisation of financial markets means that a national stock exchange makes sense.

Back in April 1986, Mr Jim Bain, Chairman of Bain and Co., stated that the merged Australian Stock Exchange will be looking for significant cost savings in transactions as well as boosting its share of international equity trading through the adoption of computerised trading systems. He estimated that while Australia accounts for about 2 per cent of the size of total world stock markets, with a computerised trading system this could be doubled. He said that if we did not take that action fairly soon, we would run the risk of losing a substantial proportion of trading in our major stocks to competing stock exchanges and other automated systems, principally overseas but also possibly local, so that our world market share might actually be halved-instead of doubled as it would be under a computerised system-to perhaps one per cent. So we need to work quickly. I compliment the Attorney-General on the legislation and on his desire to get it through by April.

I briefly mention another part of the legislation, relating to the National Guarantee Fund. Under the Bill protection for investors will be increased and a pool of money will become available from the existing fidelity funds to provide for development expenditure on national securities matters; for example, proposals for clearing houses and screen trading. The National Guarantee Fund will be made up of funds from the existing State fidelity funds, and about $15m of that fund will be used for investor protection through contract guarantees and insolvency protection. An unofficial estimate of the amounts involved in development and that sort of area is in excess of $30m. The National Guarantee Fund should be better able to handle crises in the area of investor protection. The support of every member in the House is welcome, and I commend the intention of the Bill to first of all establish a more co-ordinated, nationally oriented securities market and to provide additional investor protection to ensure confidence in that market.

Mr DEPUTY SPEAKER (Mr Cowan) —Order! It being 12.45 p.m., the debate is interrupted in accordance with sessional order 101A. The debate may be resumed at a later hour.

Sitting suspended from 12.45 to 2 p.m.