NSX innovation and access to capital for small to medium size enterprises
Andrew Musgrave, Head of Business Development, National Stock Exchange of Australia
Innovation is probably one of the most important forces currently fueling growth of new products, sustaining incumbents, creating new markets and promoting global competitiveness. Even so, many firms do not invest enough in innovation and lose sight of long term ambitions in favour of short term goals.
In Australia, one area that has come under the microscope in recent times is the issue of raising capital for small to medium size enterprises (SME) and crowd source funding.
Access to capital by SMEs is challenging due to the banks’ tough credit processes and their generally asset based approach to lending. This is particularly true for Fintech companies as they struggle to fit within the banks’ risk appetite.
Because of these restrictive lending practices, crowd source funding has gained traction in recent times and the Australian Government has responded by implementing the Corporations Amendment (Crowd-Sourced Funding – “CSF”) Act which enables small businesses to raise capital via crowd funding platforms. This legislation will enable retail investors to buy up to $10,000 worth of shares in unlisted companies with an annual turnover of up to $25,000,000.
As CSF platforms gain traction, traditional stock exchanges will need to evaluate their existing business model and look at ways of expanding their services to cater for private companies. Capital raising alternatives to an IPO, such as venture capital or crowd source funding, while growing rapidly still provide a relatively small pool of capital for SME’s.
The National Stock Exchange of Australia (NSX) is the second largest exchange in Australia and is creating a better experience for companies and investors in Australia. NSX brings a true commitment to service and support for the companies and investment products that list on its market.
A lack of competition leads to stagnation and resistance to change. We are focused on developing new, innovative solutions that help drive more efficient and affordable markets. This new innovation, outside of traditional IPO’s, will also look to capture a new breed of companies and capital raising options that are becoming increasingly prevalent in today’s capital markets and allow us to better meet the needs of our customers.
With the restructure of NSX over the past 12 months, we know that the most important thing to an investor is the company, not the exchange that it is listed on. That’s why we have invested with IRESS to create a single point of market access and a uniform process for brokers whether they are trading ASX or NSX stocks. This IRESS solution went live in June 2017.
With the introduction of IRESS, a collaborative approach when working with our issuers and engaging with emerging growth companies at an early stage, we believe an innovative re-focus on the fundamental values of a stock exchange can reverse the disruptive effects of trade focused business models, and give companies, brokers and investors access to a stronger, fairer and more transparent stock exchange.