The Cboe Global Markets exchange in Chicago, Illinois.

(Bloomberg) -- Cboe Global Markets Inc. received regulatory approval to conduct stock listings in Australia, bringing it closer to challenging the nation’s embattled main exchange operator ASX Ltd.

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The country’s financial regulator signed off on a listing market application from Cboe’s Australian unit after a review, according to an Australian Securities & Investments Commission statement on Tuesday.

ASIC’s decision will allow initial public offerings on Cboe Australia, threatening to end ASX’s local market domination. Chicago-based Cboe currently provides trading in ASX-listed securities and admits exchange-traded funds through its own market.

The move also follows years of hitches at the ASX, including a botched technology upgrade to its clearing and settlement platform, that’s led to a wide-ranging regulatory probe over failures in governance and risk management practices.

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“This move will provide more choice for companies to list in Australia, build more links to offshore markets and create more options for investors, which is good news for the Australian economy,” ASIC Chair Joe Longo said in the statement.

With the approval, companies will be able to list on an exchange run by the US firm in Australia. Cboe is already competing against the New York Stock Exchange and Nasdaq after expanding into the listings market in 2023.

Some market observers say that the ASX’s entrenched monopoly will be difficult to challenge. While Cboe has a strong global reputation, the ASX will likely remain the most appealing exchange to local companies, according to Carole Comerton-Forde, a professor of finance at the University of Melbourne.

“If you are a large Australian company listing in Australia you will want to be included in the index because that’s important for visibility and attracting investors,” she said. “That’s a challenge that will have to be addressed.”

Meanwhile, Australia’s struggling IPO market has started to turn a corner after a Covid-induced drought. Virgin Australia Holdings Ltd. and Gemlife Communities Group both began trading earlier this year after raising at least A$600 million ($397 million) in separate IPOs. DigiCo Infrastructure REIT’s debut last year marked the nation’s largest IPO since 2018, data compiled by Bloomberg show.

The nod for an alternative listings market marks regulators’ latest efforts to improve competition and participation within Australia’s capital markets. In February, ASIC ordered ASX to publish a comparison of fees against international providers to reduce competitive barriers to entry for new entities. ASX’s listings business contributes about a fifth of its revenue, according to its latest full-year results.

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ASX Pressure

Cboe’s Australian listing foray is among a litany of issues facing ASX Chief Executive Officer Helen Lofthouse, who’s facing demands for accountability over governance and aging technology infrastructure.

ASIC and the Reserve Bank of Australia started a probe into the exchange this year following “repeated and serious” failures. ASX’s shares rank among the worst-performing exchange operators in the world. Its stock slipped as much as 1.7% Tuesday.

The exchange has “considerable work to do” to meet the expectations of regulators, the Reserve Bank said in a statement last month, signaling that moves until now haven’t been enough.

(Adds observer’s comment in seventh, eighth paragraphs and ASX share move in 12th paragraph)

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