CSE, NSX Team Up to Boost Australia's Venture Market | Anna Serin, Eduardo Carmona

Key Concepts

• NSX (National Stock Exchange of Australia): An Australian stock exchange with roots dating back to the 1800s, historically focused on venture capital and innovative listings.
• CSC (Canadian Securities Exchange): A Canadian stock exchange known for supporting emerging growth companies, particularly in the resource and life sciences sectors.
• Dual Listing: The process of a company being listed on multiple stock exchanges simultaneously, providing access to broader investor bases and increased liquidity.
• ASIC (Australian Securities & Investments Commission): The financial regulatory body in Australia.
• Superannuation: The Australian pension system, a significant source of investment capital.
• Venture Market: A segment of the stock market focused on funding early-stage, high-growth potential companies.
• OTC (Over-the-Counter) Market: A decentralized market where securities are traded directly between parties, often accessed through a ticker obtained via recognition with the SEC.

CSC’s Acquisition of NSX: A Deep Dive

This discussion centers on the Canadian Securities Exchange’s (CSC) recent acquisition of the National Stock Exchange of Australia (NSX), finalized in October, and its implications for companies and investors in both countries. The conversation, featuring Anna Sarin (CSC) and Eduardo Corona (NSX), details the historical context, strategic rationale, and future outlook of this partnership.

Historical Context of the NSX

The NSX’s origins trace back to the 1800s Australian Gold Rush with the Bindigo Stock Exchange, evolving through the Newcastle Stock Exchange to become the NSX in 2006. Notably, the NSX claims to be the first stock exchange to tokenize real-world assets, specifically wine vats, between 2001 and 2003, and previously hosted a market for taxi license plates. This history demonstrates a willingness to embrace innovation and unconventional listings.

Rationale Behind the Acquisition – CSC Perspective

Anna Sarin explained that the CSC pursued the acquisition due to strong demand from its issuers for access to the Australian market. Australian investors demonstrate a significant appetite for mining companies and possess robust retail investor programs fostering liquidity. The NSX’s regulatory approach and policies aligned closely with the CSC’s, making it a natural fit for integration and expansion. The CSC aims to leverage its expertise and technology to help the NSX build a thriving venture market. As Sarin stated, “We found that a lot of our issuers were wanting to access Australia and they were really struggling to do so.”

NSX’s Vision: Building a Venture Market in Australia

Eduardo Corona highlighted the absence of a dedicated venture market in Australia, positioning the NSX to fill this gap. The goal is to create a market similar to the combined strengths of the TSXV and CSE, catering to companies with varying market capitalizations. The NSX’s mantra is “one size doesn’t fit all,” recognizing the need for tailored regulatory scrutiny based on company size and sector. Corona emphasized the ambition to create a venture market, stating, “We want to be a bit of the TSXV and the CSE combined.”

Benefits of Dual Listing for Companies

Both Sarin and Corona emphasized the advantages of dual listing for companies. Canadian companies gain access to the Australian investor base, particularly those with a strong understanding of the mining sector, and benefit from 24-hour trading opportunities across different time zones. Australian companies, conversely, gain access to North American capital markets through the CSC’s recognition with the SEC, enabling OTC trading. The dual listing also enhances share resilience by diversifying exposure across two capital markets with potentially differing valuations.

Sarin noted Canada’s reputation as a “safe jurisdiction” for growth companies, making Canadian-listed issuers attractive to Australian investors. Corona pointed out the potential for companies to access Australia’s “superannuation” (pension) system, which features investment banking-sized offices actively engaged in stock picking with domestic investment mandates.

Investor Benefits and Market Dynamics

Australian investors are described as being particularly “mining educated,” possessing a strong understanding of the resource sector. This creates a favorable environment for exploration companies. Canadian investors gain access to Australian companies, potentially diversifying their portfolios. The NSX’s focus on younger, entrepreneurial companies offers investors opportunities in emerging ventures.

NSX Listing Requirements and Target Companies

The NSX aims to attract younger companies with a “lighter touch” listing rule set. Key requirements include:

• No minimum listing share price.
• Shareholder spread of 50.
• Free float of 25%.
• No assets or profits test.
• Minimum market capitalization of AUD 500,000.
• Two years of audited financials (with potential waivers based on board experience).

Corona positioned the NSX as potentially mirroring the CSE’s earlier stages, offering a streamlined and accessible listing process.

Emerging Trends and Future Outlook

Several trends are shaping the future of listings on both exchanges:

• Oversubscribed Financings: The CSC is experiencing strong demand for financings, particularly in the resource and life sciences sectors, often from investors outside Canada.
• Interest in Dual Listings: There’s growing interest from both Canadian and Australian companies in dual listing.
• Cryptocurrency-Based Listings: The NSX is actively pursuing listings of cryptocurrency-based assets, working with ASIC to gain regulatory approval.
• Transfer from Competing Exchanges: The NSX is offering a cost-effective program to facilitate transfers from other Australian exchanges.

The NSX currently has around 50 listings and aims to reach 100 within the next one to two years. The acquisition is expected to accelerate growth and establish the NSX as a prominent venture market in Australia.

Notable Quotes

• Anna Sarin (CSC): “We found that a lot of our issuers were wanting to access Australia and they were really struggling to do so.”
• Eduardo Corona (NSX): “We want to be a bit of the TSXV and the CSE combined.”
• Eduardo Corona (NSX): “One size doesn’t fit all.”

Synthesis/Conclusion

The CSC’s acquisition of the NSX represents a strategic move to expand access to capital for companies and investment opportunities for investors in both Canada and Australia. The NSX’s focus on building a dedicated venture market, coupled with the CSC’s expertise and technology, positions the combined entity for significant growth. Dual listing offers compelling benefits for companies seeking diversification and broader investor reach, while investors gain access to new markets and opportunities. The NSX’s commitment to innovation, particularly in the cryptocurrency space, further underscores its potential to become a dynamic and influential exchange in the Australian financial landscape.