Former Westpac chief executive David Morgan is returning to the Australian financial services market after an eight year absence with the bold ambition of helping self managed super funds to end their chronic lack of diversification in equities.
Dr Morgan, who was named as chairman of Chi-X Australia on Tuesday following its purchase by the private investment firm where he works, JC Flowers, said Australia's securities markets were "ripe for innovation".
"This market is chronically undiversified - it is chronically underweight international equities," he said in an interview in Sydney. 
"We are particularly underweight in sectors like tech. We have big banks, and we have some big resource companies and our tech sector is 2 per cent of the index."
"When so much is going on in tech, we want self-managed super funds to have access to individual tech stocks like the Apples and the Googles."
Chi-X is working on a product it calls "transferable custody receipts" (TRaCRs) which would allow Australians to trade stocks from the New York Stock Exchange and NASDAQ on Chi-X in Australia.
"For people to have direct access to those stocks with low cost, minimum paperwork in Australian currency with an Australian dividend, with an ability to trade in the Australian time zone is a major innovation," Dr Morgan said.
"We are well advanced with that and expect to have that in the market by   September."
Australia's 570,000 self managed super funds had net assets of $594.6 billion at   December 2015 with $176.5 billion in Australian equities and $1.9 billion in overseas equities, according to data from the Australian Bureau of Statistics and the Australian Taxation Office.
  ASX's high prices   
Dr Morgan is executive chairman of the Asia Pacific and European branches of JC Flowers - which bought Chi-X Australia along with Chi-X Japan in   January. He had his first board meeting with Chi-X Australia last Friday prior to the company announcing his appointment to the chair on Tuesday, which Street Talk first revealed in   March.
He said JC Flowers bought Chi-X because the ASX's high prices gave it a good chance to undercut it and still make a profit.
"Any industry where there has been a quasi monopoly is generally associated with high margins, there are opportunities for a lower cost player to come in and charge substantially lower prices and still be profitable," he said.
Dr Morgan was Westpac chief executive from 1999 to 2008 and one of the international advisers to the Murray Financial System Inquiry, which handed its final report to the government in   December 2014. 
He said JC Flowers will likely own the exchange for at least four to five years before exiting. Any future buyer will need to see a good track record of market share and profits in the various new products it has launched in the past year.
JC Flower's has two basic plans: expanding market share in the existing equities trading business of Chi-X, which now has about 12 per cent share, but more importantly bringing "innovative products" to market, particularly the TraCER securities announced last week - which if approved by regulators will allow trading on US stocks on Chi-X in Australia from   September. 
"If that is half successful it could be far and away the main game," he said. Chi-X is also spending millions of dollars on several new products to compete with ASX's offerings, including exchange traded funds, warrants and new market stock indices.
  Chronically undiversified  
ASX already offers its own products in these areas, but Chi-X has pledged to significantly undercut its prices.
"This place is ripe for innovation. It is the 20th largest economy in the world, but the fourth or fifth largest pension system in the world and it is chronically undiversified," Mr Morgan said. 
Referring to TraCERs, he said it was important to get a "first mover" advantage over ASX so that "people think of Chi-X" when they think of buying international stocks.
"For SMSFs to be able to buy international tech stocks at low cost in Australian currency with an Australian dividend and trade within the Australian trading day - that is a major innovation."
Dr Morgan said the government's announcement last week that it will give the competition watchdog the ability to arbitrate disputes between ASX and its competitors was one of the most important changes for Chi-X along with the plan to end ASX's monopoly on clearing equity trades, which accounts for 7 per cent of its revenue.
"What CFR have done is a pro-competitive move that absolutely levels the playing field out and gets the ACCC involved in binding arbitration," he said.
JC Flowers specialises in financial services and has about US$8 billion in assets. It is the biggest shareholder of the seventh largest bank in Japan, Shinsei Bank, has stakes in KT Capital Corporation, a Korean non-bank finance company and SICOM Ltd, a provider of financial solutions and advisory services in India.