We are hiring!news / October 22, 2025
Back to News From CHESS to tokenisation: how Australia can rebuild its capital-market edge
New research finds Australia’s capital-market structure is under pressure and calls for modern infrastructure to better connect superannuation capital with growth companies
- With only 30% of super inflows allocated to Australia, increasing domestic allocation is essential to rebuilding Australia’s capital market edge
- The report identifies opportunities to strengthen how Australia’s markets facilitate capital access for smaller and mid-sized companies
- New infrastructure is required to better meet the needs of alternative markets
FCX, Australia’s first fully regulated private markets platform, has today released research by Mandala Partners highlighting emerging challenges facing Australia’s capital markets – and outlining a potential pathway to address them through innovation.
The report, ‘Diverse alternative infrastructure for competitive Australian capital markets’, shows that, while Australia’s capital markets are among the world’s largest, their structure no longer matches the needs of Australia’s economy.
Australia’s superannuation sector is expected to become the second largest in the world by 2031 – but only 30% of inflows are directed to Australian assets. This has created a capital environment where local growth companies are increasingly unable to access domestic funding and investment.
Liquidity constraints weigh most heavily on smaller companies
Small cap growth companies, the traditional pipeline of innovation and employment, are most affected by these challenges. Liquidity in public markets has polarised: the “asymmetric market reality” of the ASX offers deep liquidity for ASX 200 stocks which enjoy high turnover, but less frequent, low turnover for small caps. This disparity means a higher risk premium for small caps, exposing them to greater price volatility and higher costs of capital.
As a result, small caps are increasingly turning to private markets for capital, evidenced by a 92% decline in smaller listing IPOs since 2021. Private market AUM have seen 2.6x growth in the decade to 2024, to $149 billion. Yet private markets’ advantages over public comes at the expense of liquidity, with private-equity fundraising cycles now averaging 12–18 months, with holding periods averaging seven years.
Companies are often left with the choice of an illiquid private market or difficult-to-access public one.
“Our markets work well, but they’re still running on 20th-century plumbing,” said Steve McLean, Head of Corporate Finance at FCX. “If we can upgrade the pipes, connect the private and public sides, capital will flow more easily to the companies that need it most.
“Australia’s investors have the scale, and our entrepreneurs have the ideas; what’s missing is the infrastructure that lets them meet in the middle. Modern market technology can make that connection seamless, faster, fairer and far more efficient for everyone involved.”
Meanwhile, Sydney’s global standing has eroded, from 10th to 30th place on the Global Financial Centres Index – a “symptom of structural inertia” revealing a financial system that has not adapted to new forms of capital formation or trading.
Amit Singh, Managing Partner at Mandala said: ““Australia’s securities markets need to be augmented to maximise outcomes for participants.
“If Australia can modernise its private-market infrastructure, even a small re-allocation of superannuation capital could have a transformative effect on smaller companies and on our economy.
“FCX and FinClear are pioneering technology that could become the connective tissue of Australia’s modern capital system for smaller companies.”
The $13 billion-a-year efficiency opportunity
Australia’s market infrastructure has served the economy well for decades, but was built for a pre-digital era. While leading global markets are progressing toward T+0 capabilities, local systems remain on T+2 settlement cycles, with data and reporting processes that limit flexibility and speed.
The report estimates that these frictions contribute to liquidity premia and funding costs of around $13 billion each year – value that could be unlocked through modernisation.
Rather than replacing existing public or private markets, the research highlights the potential for new, interoperable infrastructure that connects both layers.
FCX, developed by FinClear, is cited as one example of this emerging model – a regulated, technology-enabled market designed to make private-company ownership transferable, transparent, and liquid, while maintaining strong compliance standards.
ASIC and the RBA have been among the world’s most forward-thinking regulatory bodies in this space, having granted FCX the first combination of Australian Market Licence and Clearing and Settlement Facility Licence for a private-markets platform – a milestone that highlights the opportunity for innovation within a trusted framework.
Building the bridge
FCX, developed by FinClear, is the first globally integrated and regulated ecosystem that offers liquidity on demand for private companies and wholesale unlisted funds. Granted historic licenses by ASIC and the RBA last year, it’s currently the only market outside of the ASX with complete market and clearing and settling capabilities.
By tokenising company equity, FCX enables instantaneous settlement (T + 0), fractional ownership, and transparent share registers. More than $3 billion of private-company assets are already recorded on its digital marketplace.
The implementation of tokenisation could significantly reduce capital costs in Australian markets by lowering liquidity premiums – returning the $13 billion a year to issuers.
Alternative markets for liquidity could enable founders, employees and early investors to realise value, and provide domestic capital with a regulated environment in which to invest in high growth companies. Ultimately, the missing layer could re-establish Australia as a financial-innovation hub and leading global centre.