One of Australia’s most senior company directors, QBE chairman John Cloney, has accused the ASX of a regulatory conflict of interest which is damaging the market.

Addressing QBE’s AGM in Sydney today, Cloney let fly at the ASX, all but accusing it of allowing short sellers to attack his company’s stock in recent months. He told the meeting the ASX had more interest in “clipping the ticket’ and raising its revenues as the market operator than acting as market regulator.

We are firmly of the view that the Australian Securities Exchange (ASX) has a conflict of interest in its dual role as market operator and market regulator.

As market operator, it is not in the ASX’s interest to take steps to decrease trading volumes. They clip the ticket for every transaction so the more transactions the better. Therefore we believe that existing regulation of the market should be transferred to the Australian Securities and Investments Commission (ASIC) and disclosure introduced to protect smaller shareholders. We do not need more regulation, rather we need effective regulation.

It is by far the strongest attack from a major Australian businessman on the regulatory efforts of the ASX. Besides chairing QBE, Cloney’s a director of Boral, Maple-Brown Abbott and the Australian Institute of Management NSW & ACT.

His comments came after he expressed concern at the activities of short sellers in QBE shares and called for greater transparency and disclosure of this type of trading:

Significant short selling of the stock has occurred and on more than one occasion, unfounded market rumours have added to the share price volatility. We are conscious that this phenomena is not limited to QBE shares; however we urge the corporate and market regulators to increase their vigilance and require better disclosure to ensure a more orderly market to protect the interests of all shareholders.

With people like John Cloney offside, the ASX’s days as market regulator are numbered.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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