The Australian Securities Exchange has appointed high-profile former Treasury secretary Ken Henry to its board as financial regulators consider ending the exchange's monopoly on post-trade clearing services.
Dr Henry, who quit his post at the Treasury in 2011 after 10 years in the job, will join the ASX board on February 1.
He already has a number of other academic and research directorships but only one corporate board seat, at National Australia Bank. When he was appointed to the bank's board in October 2011, he came under fire over perceived conflicts of interest while he was advising the government on the Asian Century white paper.
Dr Henry's appointment is tinged with irony after he made headlines last year for criticising what he saw as investors' excessive reliance on the sharemarket -- the mainstay of ASX's activity. His concern was that high levels of volatility in equities can have a disproportionately negative effect if bad times strike shortly before savers choose to retire.
His appointment comes at a critical time for ASX, which is fiercely opposed to moves by regulators to increase competition for clearing services, which it claims will only benefit high-frequency traders.
ASX chairman Rick Holliday-Smith welcomed Dr Henry's acceptance of the position. "Ken's reputation and experience as an economist in Australia and overseas, and as a senior bureaucrat who has worked with successive Australian governments, will bring fresh perspectives and strengthen the expertise of the ASX board," he said.
Dr Henry's arrival on the board will give ASX a much better chance to understand how the federal government in general and Treasury in particular works.
That will be a valuable asset given the debacle over the failed merger of ASX and Singapore Exchange early in 2011.
In late 2010, the ASX board was unable to steer the takeover through the Foreign Investment Review Board, which answers to Treasury, and through parliament.
The FIRB torpedoed the plan on the basis that there would be problems maintaining control over how share trades are cleared and settled.
Since then, however, there have been moves to dismantle ASX's lucrative monopoly over clearing. Although ASX now has a trading competitor in Chi-X Global, ASX makes more money clearing Chi-X's trades than Chi-X makes executing them.
David Richardson, senior research fellow at the Australia Institute, said Dr Henry could be a good asset for ASX "in its coming street fights with the bureaucracy about how it is regulated".
But the appointment "gives the appearance of a conflict of interest at a time when Treasury is undertaking a review of the financial market licensing regime, and following the failed takeover of the ASX".
