Diverse alternative infrastructure for competitive Australian capital markets
13.10.2025 - 06:30
Our latest research in partnership with FinClear identifies potential challenges with traditional markets, specifically for small cap firms. This study examines trade data from the ASX to demonstrate the ongoing liquidity challenges for small cap firms, which could be addressed by alternative capital market infrastructure.
Australia needs competitive capital markets that facilitate access to capital and liquidity.
Australia’s capital markets exceed AU$5 trillion in value, with superannuation funds playing a significant role by accounting for nearly a quarter of all capital market investments. As Australia’s superannuation system continues to grow, there is a unique opportunity for Australia to strengthen its capital market competitiveness. Australia’s position as a financial centre has declined over the last 15 years. To regain competitiveness, Australian capital markets need to provide efficient capital raising and adequate liquidity for companies of all sizes.
Many small caps face ongoing liquidity challenges that traditional markets have difficulty addressing
Companies can choose to raise funds through traditional public and private markets, as well as alternative market options. While public markets have been the dominant source of capital fundraising in Australia, there has been a shift with public listings in Australia at its lowest level in recent years. In 2024, only 29 companies were publicly listed – an 85 per cent decrease from 2021 levels. From 2014 to 2024, the value of equity raised in IPOs has declined by over 80 per cent. This decline was largely driven by a decline in small cap firm IPOs, which have accounted for over 70 per cent of all IPOs since 2018. Among small caps, there has been a 92 per cent reduction in the number of IPOs since 2021.
This shift is a reflection of large cap firms experiencing the liquidity benefits of public markets, while small cap firms often struggle, seeing trading activity concentrated around isolated events. Trade volume data from the ASX in 2024 shows that 11 per cent of non-ASX200 securities had at least one day where trade volume that was over 20 per cent of the total trade volume for the year, compared to only 1 per cent of ASX200 securities.
Australia needs to foster an ecosystem of diverse alternative market infrastructure that can unlock liquidity for small caps
Alternative market infrastructure can bridge the gap between public and private markets, offering tailored solutions for small cap companies struggling with liquidity challenges. Legacy market infrastructure is hamstrung by processing limitations, settlement delays, restricted data access, and compliance burdens disproportionately affecting small caps.
Innovative approaches like tokenised securities trading platforms can help bridge the public-private divide. Global markets, such as the UK, Canada, US, and Singapore, offer valuable models for enhancing small cap liquidity.
Read the full report here.
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