No 'junk': How the Sydney Stock Exchange plans to reinvent itself

The Sydney Stock Exchange (SSX) is getting a makeover in a bid to reposition it as a top secondary exchange contender and leave behind its less successful history.

The SSX is an ASIC-regulated tier one stock exchange. The exchange first opened in 1997 as the Australian property exempt market before receiving a stock exchange licence in August 2004.

However, the SSX in the past predominantly listed Chinese companies and barely rated a mention among potential Australian listees looking for an exchange on home soil.

But the SSX is now entering a new era, with new management staunchly focused on proving the exchange is indeed a ‘True Blue’ Aussie.

“We intentionally set out to diametrically change the strategy of the exchange,” newly appointed CEO Michael Go told Stockhead.

“It’s important for us to say: ‘we’re are a tier one stock exchange in Australia that will focus on helping to grow the Australian economy and importantly provide support to growth companies.

“It should be noted that the SSX will also support foreign investors and companies of suitable quality who will add to the Australian growth story.”

In its pursuit to become a significant exchange, Go has reassured regulators it won’t start “listing junk” just to win business.

Go said he valued the reputation of the SSX, his team and himself, and would not list unsuitable companies for a quick profit because of the possibility that in six months or even a year, unsuitable companies may be suspended or delisted.

To support this, Go said so far, the SSX had rejected seven applicants in the last financial year, one with a market cap valued at over $100m.

Go and his team are aiming for 20 listings by the end of this year.

“If we got to $500m market cap or above, fantastic,” he said. “They’re credible numbers and stretch enough for us to achieve based on not spreading ourselves too thinly and really looking after our customers.”

There are currently over 50 companies on a pathway to an SSX Listing, with more than 70 per cent of these companies Aussie and the rest split between Singapore, Malaysia and Hong Kong.

Less costly, not as many hurdles

Private gold explorer Torque Metals will be the first resources player to list on the SSX. The company previously tried to list on the ASX in late 2018 but was unsuccessful.

China Magnesium Corporation (ASX:CMC), meanwhile, is dumping the ASX in favour of the SSX.

The company has been suspended from Australia’s main bourse under listing rule 17.3 since July last year.

The clincher for both companies choosing the SSX over alternative exchanges has been the lower compliance costs, lower entry cost and good liquidity.

Australian incorporated and Melbourne-headquartered West Coast Aquaculture Group is also on the SSX’s “upcoming floats” list.

Torque has now received its listing date and will be lighting up the boards on Tuesday August 4 under the ticker ‘8TM’.

The SSX is connected to London-headquartered CMC Markets, who have the second most retail clients in Australia.

“The SSX actually has some 550,000 investors that will be looking at and trading your stock,” Torque Metals managing director Ian Finch told Stockhead previously.

Junior companies also only have to commit to a minimum listing price of 5c per share, which provides investors with greater leverage to the upside compared to the ASX’s 20c listing price requirement.

The SSX is also aiming to list companies much quicker than normal in Australia.

“We offer to list companies in between four and six weeks rather than, for example, 18 months to two years as we have been told is the experience of many companies seeking to list elsewhere,” Go said.

“Of course, we believe the SSX is a more cost effective and efficient listing process for companies in our target sectors.”

ESG a key focus

Socially and environmentally conscious investments have become a pretty big focus for investors in recent times.

Stats show investors are pumping billions into environmental, social and governance (ESG) investments.

ESG is also top of the SSX’s agenda as well, with the exchange creating an ESG segment.

“I recently spoke to a number of large fund managers about their views and investment strategies, and part of their current mandate is to assign a percentage of their portfolio investment to ESG,” Go explained.

“A consistent response from them being ‘where can we source product locally’? They said, ‘if you start listing ESG firms on your board and if you can create an index at some point, we’ll support you’.”

Antony Tolfts, director – market supervision and listing compliance for the SSX, told Stockhead many companies did not consider ESG for their business.

“We’ve got some really interesting companies in our pipeline who are listing to expand their operations and are now thinking about making their operations more sustainable,” he said.

“Of course, ESG extends beyond environmentalism, including equality in the workforce and good governance.

“The companies we are speaking to, irrespective of sector, can have an ESG focus, which can be commercially compelling while having a real benefit to society.”

Crypto not out of the game

The ASX has made it difficult for cryptocurrency linked companies to keep trading on the main bourse or get listed in the first place, but the SSX is not immediately shutting the doors on any potential applicants.

“Irrespective of industry sector, the SSX is in the business of listing suitable companies through efficient, supportive and best in class governance listing rules which support growth companies to reach their potential,” Tolfts told Stockhead earlier in July.

“The SSX gives prospective companies, from all industry sectors, a ‘fair go’ to provide an efficient path to market for qualifying growth companies.

“Companies operating within the digital and crypto space would receive an objective review with the same due diligence and evaluation under the listing rules as any other company looking to list or already listed.”