Investors face at least one more year of market volatility, the outgoing boss of ASX said after the share market operator posted a 7.4 per cent rise in full year profit.
Chief executive Robert Elstone also warned that if too many competitors followed pending market entrant Chi-X into Australia’s small-scale securities operation market, then there would be “tears before bedtime”.
ASX on Thursday booked a $352.3 million net profit for the 12 months to June 30 and said trading volumes had jumped in the seven weeks since its balance date.
Investors, spooked by European sovereign debt woes and Standard & Poor’s downgrade of US government debt, drove heavy falls in August on major global equity exchanges, Mr Elstone told analysts and reporters.
The high volatility caused the All Ordinaries index to lose 7.4 per cent but the average daily traded volume on the local derivatives market spiked by almost 80 per cent.
Mr Elstone said big market swings were unlikely to continue but general market volatility would probably become the “new norm” – thanks to rising global commodity and food prices and the massive government debt burden of most developed nations.
“I suspect it’s got at least got somewhere between one and three years of life.
“I’m not predicting that markets will be in the doldrums for that period of time, but I think they will be volatile for that period of time at a minimum.”
ASX annual revenue rose 8.6 per cent to $797.8 million, partly due to a 17 per cent jump in revenue from derivatives trading from banks and hedge funds speculating on the back of natural disasters and other global economic events.
An Australian equivalent to the Chicago Board Options Exchange’s Market Volatility Index (VIX) will be launched in coming months enabling investors to trade the volatility on futures contracts, deputy chief executive Peter Hiom said.
The profit result included $6.1 million in one-off expenses mostly related to transaction costs incurred on failed merger between ASX and the Singapore stock exchange.
Mr Elstone confirmed ASX was not in talks with any other market operator over a deal.
ASX is diversifying its revenue streams to buffer a possible 10 per cent revenue fall once rival Chi-X enters the market later this year, breaking ASX’s near monopoly.
Asked how many operators the local market could support, Mr Elstone said he has “deep question marks about the scale of the Australian market … to support a lot of competition across the market services value chain”.
“We think we’re well placed to compete. If too many (competitors) come in, there’ll be tears before bedtime.”
Mr Elstone will step down from the top job on October 11 after 11 years as chief executive.
ASX shareholders will pocket a final dividend of 93 cents per share, fully franked.
ASX shares eased 10 cents to $29.40.
