ASX chief defends clearing monopoly The chief executive of the Australian Securities Exchange has urged regulators and policy makers to preserve its clearing monopoly because the risks of opening the market to global competitors are not matched by the rewards. Elmer Funke Kupper said that allowing overseas rivals to clear trades in Australia would contradict the main reason the Labor government gave for blocking the Singapore Exchange's A$8bn takeover offer in 2011 - that it was not in the national interest to lose control of its financial infrastructure. "If this is allowed to happen, the government will have made a major public policy change," said Mr Funke Kupper in an interview with the Financial Times, and the next time the ASX comes up with a transaction, "they will have to say yes. They can't have it both ways. The ASX is the world's eighth-biggest exchange with an equity market value of A$5.2bn, and is widely seen as an attractive consolidation partner. The Council of Financial Regulators, the umbrella body for Australia's main financial regulators, is due to deliver to Wayne Swan, the treasurer, within the next few months a recommendation on whether clearing and settlement should be opened to competition. Clearing involves a third party guaranteeing contracts on an exchange by acting as the buyer to every seller and the seller to every buyer. LCH.Clearnet, the Anglo-French clearing house, has already applied for an alternative clearing-system license, which some analysts believe will be granted. In a report in October, UBS claimed COFR consultation was driven by a "predetermined policy position favouring competition." The Dutch executive argues that, on purely economic grounds, there is no case for ending the ASX's clearing monopoly. We've done the math around this and we think the costs are greater than the savings. It's exactly what we found with equity competition," said Mr Funke Kupper. "We are a relatively small market and fragmentation has a cost," he said, noting that every other major equity market except Europe has a single clearing facility. We think there could be A$15m-A$20m savings per annum but up to A$30m of additional costs - some of it actual costs and some of it from reduced efficiencies. Mr Funke Kupper, who has just completed his first year in charge of the ASX, also believes investors and politicians do not fully understand the difficulties of clawing back collateral and cash from overseas when there has been a large default or a financial crisis. He cited the example of the UK and collapse of the Iceland banking system. He said it is hard to justify the risk of allowing foreign companies to clear Australia's trades "because in equities the entire cost of clearing to the Australian economy is only around A$50m per annum." Although some large brokers privately share Mr Funke Kupper's concern about overseas clearing they believe that he is fighting a losing battle and eventually will be forced to lower clearing fees. The ASX has already lost its monopoly on share trading after the government granted a licence to Chi-X, an operator of alternative trading platforms. Its cash equities business is also being pressured by the growing use of dark pools - off-market venues in which large investors can trade shares between themselves.