The federal government has opened the door to competition in equities clearing - a business currently run as a monopoly by share market operator ASX Ltd.
However there is no guarantee that the reform will result in a competitor emerging on the scene.
Treasurer Scott Morrison announced a reform package on Wednesday that includes opening up the cash equities clearing business to competition and relaxing ownership restrictions on ASX Ltd.
The ownership relaxation makes it easier for a single shareholder to exceed the current limit of 15 per cent of the exchange - requiring only the Treasurer's approval instead of the support of parliament.
"(It) will mean that, should a competitor to the ASX emerge, there will be arrangements in place for safe and effective competition, allowing for a transition to competition over a period of around 18 months," Mr Morrison told reporters in Sydney.
The new arrangements reflect recommendations of the Council of Financial Regulators (CFR), which comprises the Reserve Bank, Treasury, the Australian Prudential Regulation Authority and the Australian Securities and Investment Commission.
Clearing is currently handled solely by ASX Ltd, the operator of the Australian Securities Exchange.
Clearing is what happens after shares are traded on markets, with the "clearing house" matching buy and sell orders to ensure buyers get their shares and sellers get their money.
ASX executive chairman Rick Holliday-Smith welcomed the government's additional condition that no new clearing licences would be approved until conditions that support "safe and effective competition" are established.
Key conditions include competition not compromising market stability and function.
"The Treasurer's announcement promotes the desirability of well-regulated competition in the marketplace and supports ASX's efforts to invest in and stimulate innovation," Mr Holliday-Smith said.
Changes to ownership restrictions put ASX on the same footing as other financial institutions, he said.
The Gillard government rejected an $8 billion bid for ASX Ltd from Singapore Exchange in 2011 on national interest grounds.
Competitor to ASX, Chi-X Australia, welcomed the Treasurer's announcement, with Chi-X CEO John Fildes saying clearing fees "remain too high" even after a 10 per cent cut announced on Wednesday by ASX.
"The government's announcement today paves the way for a more efficient clearing service over the long term," Mr Fildes said.
ASX's fee cut takes effect on July 1.
The expected 18 month window before any clearing competitor could be licensed also gives ASX more time to develop "blockchain" or distributed ledger technology for the market.
Blockchain - a big database recording specific market activity that could also enable the quicker completion of transactions - could have significant implications for the role of central clearing, which could reduce the likelihood of a competitor emerging.
ASX shares gained 50 cents, or 1.2 per cent, to $41.25.
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