In Hollywood, the sniper is depicted as a loner. In real life, snipers rarely work alone. They operate with a spotter in a highly skilled team.
The spotter will call the wind, make the range estimate and look for trace, and if the sniper misses the spotter will call the correction.
In the corporate theatre, there is no finer spotter than the Australian Securities Exchange.
The ASX will evaluate its target with deadly precision then, when the conditions are right, it will whisper to the politicians or the regulator: “Send it”.
The target is always competition.
So it was that the beast of competition was coldly slain, once again, when the ASX monopoly over clearing in the share market was entrenched by decree of the Treasurer.
Thud. Competition shot down for another two years.
The ASX was spotter, the sniper was Wayne Swan.
“While competition would be expected to deliver efficient outcomes, now may not be the appropriate time for changes that will have further cost implications for the industry, given current market conditions and the magnitude of regulatory change already under way,” said the Treasurer.
The spotter is not fussy about its snipers. The ASX uses a range of marksmen, deploying from time to time the Australian Securities and Investments Commission, the Council of Financial Regulators, the Australian Competition and Consumer Commission, or the Assistant Treasurer.
While sanctimoniously professing their ”long-standing commitment to competition in
financial markets” the Treasurer and the CFR promised last month the ASX could keep its monopoly for another two years while it – wait for it – “committed to the development of a code of practice”.
Truth, along with licences for competitors, has long been a casualty in the ASX war to keep its monopoly. A tractable financial press doesn’t hurt either.
Unlike in the other great Australian monopolies, such as Foxtel and Sydney Airport where barriers to entry are naturally high, the thing for ASX management is to hang onto the exclusive licences. In this it has done a sterling job for its shareholders. They have fared better than its customers.
Although the cancer that eventually eats away at all monopolies threatens to eat away at even the shareholders. Like all monopolists, ASX defends well but is terrible at playing offence. It has hardly had a successful new product in 15 years, although it tried its hand at the registry business, CFDs and even property settlement in Victoria.
The exchange is still making its money on the same products as it always has, despite the acceleration in the pace of technology and globalisation. Whether by toying with its pricing to turn the screws on Chi-X, stonewalling on double-dipping on CHESS access charging, taking shares IRESS, or by railing against “Dark Pools”, the ASX has stymied competition.
It is understandable to feel some sympathy for the politicians, too. A compelling character, such as ASX chief executive Elmer Funke Kupper, travelling to Canberra to regale them with tales about ”Dark Pools” and the sinister threat from ”high-frequency traders” – it’s a good story. Algorithmic traders who can bring down world markets in a ”flash-crash” with one evil little keystroke as their contorted faces snigger fiendishly behind their grotesque masks – that’s also a great story. And one that scares the living daylights out of politicians, naturally loath to be held potentially responsible for another crash of Australia’s financial markets.
But it’s a beat-up. A dark pool is no more than just a bunch of people trading somewhere else- not inclined to use the ASX because they fear the ASX’s other clients, the HFT traders, will ”front-run” their trades and snip a few basis points here and there.
Ironically, the biggest dark pool of the lot is the ASX itself, which entirely flew in the face of the global trend towards greater transparency when it went ”dark” in 2005 because a couple of big investment banks lobbied.
Funke Kupper is in somewhat of a bind, wanting the dark pools to be in-house, not outside.
Still, the main game remains spotting the hostile beasts of competition, tapping those politicians and regulators on the shoulder and whispering, ”Send it”.