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Demutualisation of the Australian Stock Exchange

The Treasurer, Peter Costello, today announced that the Government would introduce legislation to facilitate the decision of the members of the Australian Stock Exchange (ASX) to change its traditional structure as a mutual organisation and adopt a corporate structure more efficient and appropriate to the rapidly changing and competitive environment that the ASX now faces.

Demutualisation of the ASX will serve to enhance the efficiency and the competitiveness of the ASX and Australia's capital markets domestically and internationally, and confirm the status of the ASX as a leading securities market for the Asia-Pacific region.

"The ASX is a central facilitator of Australia's capital markets", the Treasurer said. "It plays a vital role in allocating the savings of Australians to productive forms of investment."

The Treasurer confirmed that demutualisation of the ASX will not alter the basic co-regulatory framework for the securities industry, which sees the Australian Stock Exchange working with the designated regulatory authority - the Australian Securities Commission - to ensure investor protection, market integrity and efficient market regulation. That framework has, over the years, worked efficiently and in the public interest to ensure the honesty and integrity of the securities markets and to maintain the confidence of investors in those markets.

"The legislation will ensure that the basic policies that underlie the regulation of stock markets are maintained and enhanced in the legislative framework within which the ASX will operate," Mr Costello said. "It will, in particular, clarify the responsibilities of the ASX as the front line regulator in ensuring the honesty and integrity of the securities markets for which it is responsible, and ensure that the ASX continues to be responsible for the conduct and integrity of market participants in trading on the ASX."

The Government has agreed to facilitate the proposal of members to list the ASX on its own Exchange. "Supervision of the ASX's listing will be undertaken by the Australian Securities Commission", the Treasurer said, "so as to avoid any conflict of interest that supervision by the ASX of its own listing would create".

The Treasurer also indicated that there will be statutory restrictions on the ownership of shares in the ASX. "The ASX is a special institution within the national economy and it would not be in the public interest for any one party to gain control of the ASX or carry significant influence over the governance of the ASX. Persons and their associates will generally be limited to owning or controlling no more than 5 percent of the shares of the ASX. The Treasurer also confirmed that, on its conversion to a public company, the ASX will have no further access to moneys in the National Guarantee Fund (NGF) to finance capital investments of the Exchange. "Access to NGF moneys by

a demutualised ASX, in circumstances where the profits from the capital investments funded by those moneys would pass to shareholders of the ASX,is no longer appropriate."

The demutualisation of the ASX, supported as it is by the Government, will enhance the reputation of Australian securities markets as among the best in the world.

Contact Officer:

Jim Murphy 06 263 3960