Global cost benchmarking of cash equity clearing and settlement services
ASX Clear Pty Ltd and ASX Settlement Pty Ltd (‘ASX’) commissioned Oxera to benchmark the costs of using its cash equity post-trading (clearing and settlement) services against the costs of using the services provided by other financial market infrastructures (FMIs). A ‘user-profile’ approach was adopted to assess the costs. This involved designing profiles representative of investors and brokers in the Australian cash equity market, and applying these profiles to FMIs’ fee schedules. The profiles were consulted upon with the Business Committee and other local Australian stakeholders. In the case of ASX, the cost estimates have been verified through analysis of ASX’s clearing and settlement revenues, which in the financial year of 2012/13 totalled: A$42m and A$40m respectively. The sample of comparator FMIs is not intended to be exhaustive, but has been selected to include FMIs operating at a larger scale than ASX, and to cover a range of financial centres across Asia-Pacific, Europe, and the Americas.
The overall conclusion from this analysis is that the fees charged by ASX for post-trading services—of 0.3–0.6 basis points (bp) relative to the value traded for institutional investors, and 0.9–2.0bp for retail investors—are within the range that FMIs of a comparable size charge to investors with the same trading characteristics. In relation to the nine FMIs that charge separately for CCP-type and CSD-type services, ASX is at the low end of the range for fees charged for CSD services and at the high end of the range for fees charged for CCP services. There are two likely reasons for the latter: the FMIs for which CCP fees are distinct operate at a greater scale than ASX; and ASX has more of its own funds at risk than all of the comparators. Once the contribution of ASX to the default fund is taken into account, the overall cost to users of ASX Clear is closer to the middle of the range observed elsewhere.