qbe urges switch from asx to asic

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    Todays Age * Danny John
    * April 5, 2008

    GLOBAL insurer QBE has added to the pressure on the Federal Government to strip the Australian Securities Exchange of its powers to regulate the stockmarket, arguing the ASX has a conflict of interest in its dual role as operator and watchdog.

    Angered by an attack on QBE's stock price by short-sellers over the past few weeks, chairman John Cloney told shareholders yesterday the Australian Securities and Investments Commission would be better suited to undertake the role held by the ASX.

    In a thinly veiled attack on the ASX's widely perceived failure to rein in hedge funds and other investors prepared to deliberately drive down company share prices, Mr Cloney urged the corporate and market regulators to take a more aggressive stance to protect shareholder interests.

    But the ASX was not the entity to take on that role, he said, claiming that its position as a company listed on its own exchange and from which it derived a large amount of income from higher trading volume put it into direct conflict with its job as the market regulator.

    "As market operator it is not in the ASX's interest to take steps to decrease trading volumes. They clip the ticket in every transaction, so the more transactions the better," Mr Cloney said in his address to QBE's annual meeting in Sydney.

    ASIC, which governs most other company activities outside share trading, would make a better regulator under the present circumstances, Mr Cloney indicated. "We do not need more regulation, rather we need effective regulation," he said.

    Mr Cloney used the dive in his own company's share price since the release of its annual results in late February as an example of the trading volatility allegedly instituted through the short-selling attack, which was over and above the price fluctuations normally seen on the market.

    Nearly a quarter of QBE's 886 million shares changed hands in three weeks after the results announcement, compared with just 9% in the corresponding period a year before. Average daily trading was about 10 million shares, as opposed to 3.5 million in February and March last year.

    In the period last month mentioned by Mr Cloney, QBE's share price shed almost $9 from about $28.80 to a low of $19.96. The recent market recovery has seen the stock regain almost $6, closing yesterday 78¢ higher at $25.38.

    "Significant short-selling of the stock has occurred and on more than one occasion unfounded market rumours (of a takeover bid for the company) have added to the volatility," Mr Cloney said, adding that the experience was not limited to QBE.

    Mr Cloney's comments came a day after the minister responsible for regulation, Senator Nick Sherry, indicated that the current system had performed well under recent pressure, albeit that he accepted there was a need for some "fine tuning".

    Senator Sherry said the Government would pursue changes to the Corporations Act to address the ambiguity around short-selling and the need for greater disclosure — one of the demands on Mr Cloney's "shopping list" of changes.

    ANY change cannot be worse.

    Bring it on
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