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ASIC loosens ETF rules to invite offshore entrants
ASIC is looking to make Australia’s ETF market more welcoming to foreign players.
ASIC loosens ETF rules to invite offshore entrants
ASIC is looking to make Australia’s ETF market more welcoming to foreign players.
ASIC is loosening up legislative restrictions around who can and can’t dabble in Australia’s exchange-traded fund markets.
Via an amendment to the previous ETF regulation, ASIC is now removing the requirement that ETF issuers must be Australian residents for tax purposes.
The regulator hopes that these changes will make it more viable for overseas market-marking entities to participate in the Australian ETF market.
In the long run, the idea here is to draw new players to the ETF market-making sector and generate better market outcomes through increased competition.
According to the regulator, “ASIC found that the local authorised participant requirement does not support competition or market efficiency in the ETF market-making sector.”
“ASIC found that the requirement may lead to suboptimal outcomes for retail investors trading on the secondary market, particularly due to wider buy-sell spreads than could be expected in a more competitive market.”
AUSIEX’s latest Trading Transformation report noted a significant increase in ETF trading from March 2020.
“Growth in trading of ETFs was mostly driven by holders of new accounts opened during the lockdown period as advisers sought efficient and timely ways to establish and balance new client portfolios in a rapidly evolving market,” the report said.
According to Andrew Stewart, head of product and distribution at AUSIEX, “ETF providers are creating products that are topical; for example, when we were all working from home; the instruments that gave exposure to technology and cyber security got good traction in the middle of COVID-19.”
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