The ‘new’ NSX’ (National Stock Exchange) wasn’t on my radar and therefore remained an unknown quantity until I watched OpenMarkets’ very own Gen Wood interview Ann Bowering, NSX’s CEO. An amalgam of one of Australia’s oldest exchanges – the Bendigo Stock Exchange, which dates back to the goldrush era – and the not so old Newcastle Exchange, the reborn NSX intends to give ASX a run for its money.
The NSX reminds me of the benefits extolled about investing in small cap stocks – small size provides flexibility and a nimbleness that’s just not possible with the larger brethren. Smaller companies tend to have less bureaucracy, less red tape and consequently, can move more quickly to seize opportunities. It doesn’t mean they don’t do their due diligence, it just means the process doesn’t need to jump innumerable hurdles and be signed off by 101 people across the organisation.
While considerably smaller than its rival, NSX is a tier one stock exchange and its plans centre around competing with ASX for capital raisings, both domestically and internationally. It aims to make capital raisings faster, simpler, cheaper and importantly, more accessible to both corporates and investors.
Life at the NSX over the last 12 months has been about reinvention, to take advantage of the competitive advantage that comes from being one of only three listing venues in Australia. To be competitive, the NSX team had to examine how it works with companies to provide solutions, and importantly, give them access to the capital needed to grow.
The first step was to build a new Sydney-based team, to get the right people in the right roles, with expertise across the markets.
The second, relocation to a new office in the heart of Sydney’s capital markets, to ensure accessibility. The third and key step, innovative technology.
Technology sits at the core of every exchange worldwide, and NSX is no different. Part of its reinvention was the implementation of cutting edge systems and importantly, an integration with the IRESS platform and order management system.
One of the key issues the NSX had to address was liquidity; while previously an issue due to market access, the integration with IRESS means that NSX securities will be listed next to ASX securities on the screens of brokers/advisers around Australia. This provides direct access to trading on the NSX market – that’s good news for the exchange and good news for investors.
Importantly, the integration with IRESS levels the field from a listing perspective, and means brokers can be truly exchange agnostic – it’s now all about the company and the investment opportunity it presents. It also improves competitiveness on the listing front – the NSX can go to companies considering a listing and say, ‘you have a choice’.
While there have been enhancements in technology, the exchange industry hasn’t changed much over the past decade. NSX has identified an opportunity to change the way the exchange works, to bring investors closer to companies, to work more closely with brokers, to better understand their businesses and work with them to take their businesses forward strategically. So, a choice for brokers, a choice for investors and a choice for companies wanting to list.
The NSX today
At the time of writing in November 2017, the NSX had 79 listed securities, mostly what would be classed as ‘small caps’, with a total market cap of $4.8 billion. There were 14 new listings in the last fiscal year, a 40% increase year on year. The NSX is looking to repeat or better this growth in the current financial year – and of course, blow it out of the park in the future.
Yes, a little smaller than the ASX, with its approximately 2,200 listed securities worth an estimated $1.5 trillion (not to mention its interest rate derivatives market, worth some $47 trillion).
It’s the small size and lower barriers to entry that make the NSX attractive to smaller companies. The NSX requires just 50 investors and a market cap of $500,000 for an IPO; the ASX requires 300 non-affiliated investors and companies must meet a profit or assets test, one measure of which is a market cap of $15 million. Quite a significant difference to a small company.
CEO Ann Bowering recently told emerging companies news-site Stockhead that the ‘sweet spot’ for NSX listings are those valued between $10 million and $50 million. According to the NSX website, the average capital raising currently sits at $8.3 million.
There are 22 brokers that are market participants with the NSX and until recently, OpenMarkets was the only online broker. Compare that to the 180 market participants of the ASX...that’s a lot of potential for the NSX to tap.
It has a strong pipeline of domestic opportunities, as well as several international companies looking to access the Australian capital markets and engage with Australian investors. Although there’s not much of 2017 left, NSX has a couple of interesting listings coming up:
- Charter Pacific – formerly listed on ASX, it’s a diversified financial company with interesting investment opportunities lined up through its impending purchase of Microlatch, which designs and develops mobile biometrics solutions. According to Charter, the acquisition would allow it to tap into a major global market to use biometrics on mobile devices and payment platforms.
- Vonex – a WA-based IT telco business that specialises in cloud-based VOIP and is currently developing an app to enable users to talk to others across multiple platforms and apps.
When it comes to investing, the most important thing to advisers and investors is the company and its fundamentals, not the exchange it’s listed on. With a single point of market access and a uniform process for brokers whether trading ASX or NSX stocks, new opportunities are now available and accessible.
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