ASIC pushes to bolster competitiveness

ASIC has brought together market and financial services leaders in a push to bolster competitiveness in Australia's capital markets.

This comes after new research found Australia needs to move quickly or be left behind as other jurisdictions adopt financial market innovation at speed, ASIC said.

ASIC said the roundtable would help its work on promoting dynamism in Australia's public and private markets.

The corporate regulator is working alongside the Reserve Bank of Australia (RBA) in supervising transformation in Australia's critical national markets infrastructure.

ASIC is leading the first in a series of discussions bringing together senior leaders and principals across the public and private sector.

ASIC said the focus of the discussions is on considering practical ways to strengthen and modernise Australia's capital markets, matching innovation opportunities with growth opportunities and capital need.

The new report, Innovation in Financial Markets and Financial Market Infrastructure, prepared by the Digital Finance Cooperative Research Centre (DFCRC) for ASIC, found financial markets are increasingly becoming more automated, compressing settlement cycles and enabling extended hours in traditional markets, supported by technology developments.

Against the backdrop of accelerating globalisation of capital flows and offerings, this innovation is enabling new market models and blurring lines between digital-first and established financial services players.

ASIC said this raises new implications for capital markets as agentic artificial intelligence (AI) and machine-speed, autonomous trading, and supervision tools enter the hands of traders, market participants and market operators.

"The core of ASIC's mission is to facilitate and improve Australia's financial system, and to promote confident and informed participation in that system. Ensuring that Australia's financial markets remain competitive and efficient is central to that mission," ASIC commissioner Simone Constant said.

"Geographic moats look like a thing of the past. The geographic barriers that once constrained the flow of capital are being eroded by technological developments. This makes it easier than ever for investors - wholesale and now retail - to invest offshore."

Constant added the large-scale tech IPOs happening in the US are a symptom of this and will only become more common.

"If Australia is to remain competitive - with capital raised, invested and used to help Australia and Australian businesses grow - then we need healthy capital markets underpinned by safe, resilient, modern market infrastructure," Constant said.

"Regulators and industry can work together to harness opportunities to best serve the Australian economy."

The report also outlined how standards bodies, governments and regulators across major jurisdictions are reshaping market frameworks to accommodate developments in distributed ledger technologies (DLT), tokenised assets, AI and enhancements to information technology systems, increasing pressure on Australia to keep pace.

The report said these shifts create opportunities to improve capital and operational efficiencies through modernised market infrastructure, automated market surveillance methods, ongoing public-private collaboration and regular global cross-regulator coordination; give firms clear and accessible pathways to test and operationalise new products with constructive regulatory support; and enhance competitiveness by supporting responsible innovation while protecting investors.

However, the report found some of these developments could introduce pockets of heightened concentration risk at a business- and economic-level through the use of external service providers and could amplify retail risks in gamified and social trading.

On this, ASIC said maintaining resilience standards in the era of AI and rising cyber risk is also critical.

"[The] roundtable is not about innovation for innovation's sake. ASIC's role is to provide the clarity necessary for responsible innovation, and the guardrails that keep markets stable and orderly and to keep the infrastructure operators who underpin the market, accountable and competitive," Constant said.

"That's how we can catalyse change and continue to maintain confidence and integrity in our financial system so that innovation can be safely matched to meet the big challenges in our economy and the capital that supports it."

ASIC said it will release a summary of the themes and practical actions from the roundtable. Discussions will be focused on what ASIC can and should do about the priority opportunities that innovation for safe growth offers.