Australia’s capital markets are facing a structural crisis....

Australia’s capital markets are facing a structural crisis. Despite the Australian Securities Exchange (ASX) being the nation’s primary listing venue, with over 2,200 companies and a market capitalisation of approximately AUD 1.6 trillion, the platform is increasingly misaligned with the needs of small-to-medium enterprises (SMEs) and high-growth early-stage ventures. The number of publicly listed entities is in decline, initial public offerings (IPOs) have slowed, and the rules governing admission and compliance are seen by many as inconsistent, opaque, and ill-suited to contemporary entrepreneurial realities.

A Shrinking Market for Innovation

The ASX has long held a monopolistic grip on public equity markets in Australia, with over 80 per cent of listed securities under its purview. However, this dominance has not translated into a fertile environment for innovation. Alternative exchanges, including the National Stock Exchange (NSX) and the Sydney Stock Exchange (SSX), have failed to offer credible, liquid, or attractive options for companies that cannot afford the regulatory burden or extended timelines of an ASX listing.

As noted by Joyce Moullakis in The Australian, the decline in new listings and the increase in high-profile delistings such as Sydney Airport, Boral, Blackmores and Healthscope, underscore the systemic issues. IPO volumes in 2024 remain well below the ten-year average, and the number of listed entities has fallen to 1,989. ASIC maintains that these developments are not yet structural, but the reality suggests otherwise. Australia’s capital markets are no longer keeping pace with comparable international jurisdictions such as the United States, United Kingdom, European Union, Hong Kong, and Singapore, all of which have undertaken reforms to modernise listing requirements and facilitate easier public access for growth companies.

The ASX’s Culture: “Our Board, Our Rules”

First-hand experience further illustrates the issues embedded in the ASX’s operational culture. In one case from 2016, a company attempting to list with a compliant JORC 2004 resource, fully supported by an independent geologist’s report, was instructed by the ASX to remove any mention of the resource. The explanation offered was a “new internal policy,” not reflected in any publicly available guidelines. Attempts to challenge this directive were met with rigid institutional resistance, reinforcing a perception of capricious decision-making. Even semantic issues, such as the distinction between “historic mine” and “historical mine,” became points of contention.

Interviews with CEOs of current ASX-listed companies confirm this experience is not isolated. Over 90 per cent identified compliance, and more specifically the unpredictable application of compliance rules, as the greatest operational challenge they face when dealing with the ASX. While most accept that robust oversight is essential to maintain market integrity, the current regime introduces unnecessary delays, increases advisory costs, and hinders strategic agility. This discourages prospective listings and pushes high-potential companies to either remain private or seek offshore exchanges.

Lack of Alternatives: A Monoculture Problem

Australia’s capital market suffers from an effective monopoly. The NSX and SSX were designed as secondary options but have failed to attract meaningful volume or visibility. Cboe and Chi-X, meanwhile, merely facilitate trading of securities already listed on the ASX. For SMEs and startups, this means that the ASX remains the only viable pathway to public capital, despite the fact that its structure, requirements, and ethos are increasingly unfit for purpose.

This monoculture has several consequences:

• It inhibits diversity in listing options.

• It entrenches regulatory inertia.

• It limits innovation in market structure and investor engagement.

The Consequences: Fewer IPOs, Less Capital, and Lost Opportunity

The imbalance has tangible impacts. Capital raising via public markets is faltering. As private capital becomes more attractive due to its flexibility, long-term focus, and freedom from ASX-related friction, companies are choosing to delay or forego listing altogether. Directors cite short-term investor pressures, increasing compliance burdens, and limited access to suitable institutional investors as reasons for staying private.

This is not just a commercial issue. It is a national one. The effectiveness of capital markets in supporting innovation, growth, and employment is a fundamental pillar of economic policy. If Australia cannot provide a hospitable environment for emerging enterprises to raise capital and scale, it risks losing its most promising companies to offshore jurisdictions or keeping them in private hands indefinitely.

A Proposed Solution: The Ventures-Style Exchange

To resolve this structural failure, the proposal is to develop a new, purpose-built public market platform designed specifically for early-stage and growth companies. A Ventures-Style exchange would not replicate the ASX. Instead, it would complement it by aligning more closely with the needs of SMEs, technology companies, and innovative startups. Its key features would include:

1. Growth-Aligned Economics

• Smart Contract Revenue Sharing: Listed companies receive a portion of trading revenue, creating aligned incentives.

• Success-Based Fee Structure: Compliance and listing fees scale in accordance with a company’s growth, reducing initial barriers.

2. Advanced Technology Infrastructure

• Real-Time Clearing and Settlement: Blockchain-based transactions enable instant trade execution and lower settlement risk.

• AI-Driven Compliance: Automates prospectus reviews and regulatory filings, reducing cost and human bottlenecks.

• Integrated Investor Relations Tools: Streamlined shareholder communication and cap table management within a single interface.

3. Democratised and Transparent Access

• Retail Participation: A mobile-first design with lower investment thresholds encourages broad public ownership.

• Direct Communication Channels: Facilitates transparent engagement between issuers and shareholders.

• Equal Data Access: Eliminates the information asymmetry between institutional and retail investors.

4. Community and Advisory Focus

• Support Infrastructure: On-platform access to legal, accounting, and marketing advisors.

• Mentorship Ecosystems: Helps founders prepare for listing and navigate capital markets.

• Advisory Board of Issuers: Active participation from listed companies to shape governance and policy evolution.

5. Global Connectivity

• Cross-Border Listings: Seamless dual-listing capabilities with exchanges such as TSX Venture.

• Next-Generation Compliance: Creates a regulatory model that positions Australia as a global leader in exchange technology.

An Urgent Call to Action

Regulators have acknowledged the problem but have yet to act decisively. ASIC Chair Joe Longo recently stated the need for regulatory settings to support greater participation in public markets. However, consultation alone is insufficient. As Moullakis rightly observes, what is needed is not another round of reviews but a firm commitment to reform and implementation.

This proposed Ventures-Style exchange is not intended to weaken regulatory standards. Rather, it aims to make them more coherent, predictable, and scalable for growth-oriented enterprises. It offers a path forward that is technically feasible, economically sound, and socially aligned with the goal of supporting Australian innovation.

Conclusion

Australia’s capital markets are at a tipping point. The ASX, once a reliable engine of growth, now serves a narrowing segment of the business community. Without a credible alternative, SMEs and growth-stage companies are increasingly left out of the public equity ecosystem. The result is a market that neither reflects the breadth of Australian enterprise nor supports its future prosperity.

It is time to build a new platform that reimagines what a stock exchange can be for the twenty-first century. With modern technology, adaptive regulation, and a user-first mindset, Australia can again lead in capital market innovation. Delay will only deepen the current malaise. Urgent, structural change is not optional. It is imperative.