FRAN KELLY:
Well a deal to make it easier for Australian investors to trade on the US stock market has been signed overnight in Washington.
The agreement is the first of its kind signed by the US, and will streamline standards between the American and the Australian stock markets which means you, if you're an investor, will not need to use a US registered broker to launch your bids.
The deal will also make Australian markets more attractive and accessible to American investors.
The Federal Minister for Superannuation and Corporate Law, Nick Sherry is at Washington Airport. He's about to jump on a plane and come home. He joins you now from the US capital.
Minister, good morning.
NICK SHERRY:
Good morning, Fran, good morning to your listeners.
FRAN KELLY:
Well Nick Sherry what's changed through this deal?
NICK SHERRY:
Well what it will mean is that there's a change - recognition of each country's regulatory framework insofar as securities trading is concerned. So, practically that will mean that Australian brokers and the ASX can transact securities in the US and vice versa. So, it cuts out what's known as a chaperoning arrangement, cuts out red tape compliance and reduces cost for Australians and reduces cost for US investors.
FRAN KELLY:
Let me try and put in terms that I can make sense of. It means if I wanted to invest in something listed on the Dow Jones, I can now do that, whereas before it was quite tricky?
NICK SHERRY:
Well you will be able to - once the approval is given for a broking firm - to go to an Australian broking firm and they will do the transaction for you without that Australian firm having to go through a US firm which adds to cost, because you've got to go through two intermediaries, one intermediary is cut out.
FRAN KELLY:
Okay, so it's quicker and cheaper. But it's not as quick...
NICK SHERRY:
Correct.
FRAN KELLY:
...I can't do it on my direct online trading if I wanted to?
NICK SHERRY:
Yes you can. If you - if the broker, or the ASX have operations online, you can do it through that format.
FRAN KELLY:
Okay and the deal cuts the other way too? US investors will now be able to access our stock market directly. Have you had any sense of what kind of interest there might be either way?
NICK SHERRY:
Look I think that there is a lot of interest from both countries, because it does reduce compliance costs and red tape and there are savings involved for operating through the mutual agreement.
I think importantly, very importantly, this is also the first time that the United States has recognised any other country's jurisdiction in the world. We are the first. They've recognised that Australia does have a reliable regulatory framework in securities trading such that the US will recognise Australia's robustness and regulatory oversight.
FRAN KELLY:
And Minister, is this a good thing for Australian companies, having a - I guess it means a potentially bigger investment pool? What's good about this?
NICK SHERRY:
Well it reduces cost because it reduces compliance and duplication. But it makes the Australian markets and the US markets more open to each other's capital flows at a reduced compliance cost. It improves liquidity.
I think generally, it's a recognition that around the world, investment instruments and regulation supervision increasingly will be international. It will take a long time to have truly international regulatory and supervisory arrangements and this is one step in that direction. And that's important given the issues in terms of financial instruments and other forms of investment which perhaps, some day will be covered by such mutual recognition arrangements.
FRAN KELLY:
When it's up and running, I mean I wonder if you have any sense of whether it's going to make a difference to our markets? Will they be more volatile with so many more traders in the pool or do you have any sense of that?
NICK SHERRY:
Well there'll be more liquidity, there'll be more flow. I think that broadly is going to be the improvement, and there'll be a reduced compliance and red tape cost to investors and that's got to be a good thing.
FRAN KELLY:
So it's just bringing down those walls. We have similar deals already with New Zealand and Hong Kong.
NICK SHERRY:
That's right.
FRAN KELLY:
Are there plans for agreements with other international markets? And I guess the big one there will be China.
NICK SHERRY:
Yes. We're certainly interested in as many mutual arrangements as we can obtain. I mean the US is really one I'd have to say, as I said earlier, it's the first country - Australia's the first country in the world the US has recognised on mutual recognition. It follows the initial agreement on discussions between the Prime Minister and chairman of the SEC, the US SEC regulatory authority, Chairman Cox earlier this year.
FRAN KELLY:
Okay. Nick Sherry, thank you very much for joining us.
NICK SHERRY:
Thank you and good morning.
FRAN KELLY:
Senator Nick Sherry. He's the Federal Minister for Superannuation and Corporate Law.