In a detailed submission to ASIC’s Australia Evolving Capital Markets consultation, ASX has outlined a suite of proposals aimed at improving the competitiveness and appeal of Australia’s listed markets. While recognising that the recent decline in IPO activity is largely cyclical, ASX considers that structural reform is needed to ensure public markets remain globally competitive and a compelling option for both local and offshore companies.
Background
ASX’s submission is in response to ASIC’s discussion paper on the evolving relationship between public and private capital markets. While Australia’s public markets are known for strong regulatory standards, efficient secondary capital raising and broad investor access, ASX warns that other jurisdictions are moving faster to modernise their frameworks.
Citing recent reforms in the UK, Singapore, Hong Kong and the US, ASX is calling for a proactive review of local settings to remove unnecessary friction and provide greater flexibility for listed entities and those entities considering a listing.
Proposed reforms
ASX’s submission outlines seven specific proposals to improve access, transparency and alignment with international best practice:
1. Streamlining the IPO process
ASX proposes reducing the ‘on risk’ period between lodgement of the final prospectus and quotation. This period currently exposes issuers and investors to market volatility for up to three and a half weeks. ASX recommends enabling earlier regulatory review of draft prospectuses by ASIC, limiting extension of the exposure period, and allowing retail applications to be processed during this time.
2. Optional financial forecasts in prospectuses
Feedback from market participants highlights that regulatory expectations around forecasts can deter listings, particularly for companies with unpredictable earnings profiles. While there is no strict legal requirement to include a forecast, ASIC guidance generally expects one where reasonable grounds exist. Many issuers view forecast disclosure as a source of regulatory and litigation risk, which can further discourage companies from listing. ASX supports a clarified, optional framework that would allow issuers to either include a forecast or explain why one has not been provided.
3. Reducing free float requirements
To attract founder-led and early-stage companies, ASX proposes reducing the minimum free float requirement from 20% to 15% under the ASX Listing Rules and from 30% to 15% for S&P/ASX Index inclusion. This would better align with global standards and enable companies to retain greater ownership post-IPO, while still maintaining liquidity and governance standards.
4. Dual-class share structures
ASX supports public consultation on whether dual-class share structures should be permitted in Australia. Under this model, companies issue two or more classes of shares with different voting rights, allowing founders or early investors to retain greater control through enhanced voting power. ASX notes that similar reforms have been adopted overseas and points to Atlassian’s decision to list on the NASDAQ, rather than ASX, as an example of the competitive disadvantage posed by Australia’s current regulatory position.
5. Founder and insider sell-down mechanisms
ASX recommends exploring an Australian equivalent to the US Rule 10b5-1 trading plans. These plans allow insiders to pre-authorise securities sales, helping to manage insider trading risks and reduce the negative signalling often associated with block trades. This would support more transparent access to liquidity for founders, particularly where insiders are frequently in possession of inside information.
6. Lowering foreign exempt listing thresholds
ASX proposes reducing the market capitalisation threshold for foreign exempt listings from $2 billion to $500 million. With equivalent standards maintained by acceptable home exchanges, this change would allow more global companies to pursue a secondary listing on ASX. ASX considers the quality of foreign exempt listings can be maintained at this lower threshold, given the requirement that eligible entities must already be listed on a recognised exchange with broadly equivalent listing standards.
7. Reforming the corporate bond market
ASX has reiterated calls for reform to support the development of a more robust and accessible retail corporate bond market. Proposed changes include simplifying disclosure requirements, allowing earlier redemptions, increasing trustee availability, and improving access to credit rating information. These reforms aim to broaden retail investor participation and provide companies with an alternative source of capital.
Key takeaways
ASX’s submission outlines a clear reform agenda aimed at improving the efficiency, accessibility and global competitiveness of Australia’s public markets. The proposed changes seek to reduce barriers to listing, improve regulatory clarity, and provide companies with greater flexibility in structuring their capital and accessing investors.
By modernising listing processes and broadening access to equity and debt markets, ASX aims to ensure public markets remain an attractive and reliable avenue for raising capital in Australia.
This article was written by David Naoum, Partner and Lachlan Pearce, Solicitor.
