A message exchange system between ELNOs
A market that gives choice to customers
Today, all parties to a conveyancing transaction will have to subscribe to the same Electronic Lodgment Network Operator (ELNO) to complete the transaction. With more than one ELNO now operating in NSW, lawyers and conveyancers should be able to transact efficiently and securely while only subscribing to the ELNO(s) they choose.
One solution is to require ELNOs to connect their back-end systems, or ‘interoperate’. The concept of interoperability is familiar from other industries – for example, Telstra customers can phone Optus customers without having to set up an account with Optus. Similarly, in eConveyancing, with interoperability, conveyancers or lawyers with one ELNO will be able to complete a transaction with conveyancers and lawyers of another ELNO, without having to subscribe to all operating ELNOs. Of course, the messaging between ELNOs will present different risks and solutions to that of phone operators, but the principle remains the same.
The NSW and South Australian (SA) Registrars, on behalf of their respective Governments, are working closely with industry to develop a national solution to interoperability. This work builds on the substantial analysis to date, including the IGA review, the IPART report and the NSW Nicholls working groups (each described further below).
This work has been designed to complement and support the investigations by Australian Registrars National Electronic Conveyancing Council (ARNECC), the Australian Competition and Consumer Commission (ACCC), and the review of the eConveyancing Intergovernmental Agreement. Over time, as the market structure and preferred model become clearer, we will support more detailed investigations into the topics that need to be resolved.
It is crucial that Government partners with industry, to achieve a reform that meets industry’s needs. NSW Office of the Registrar General (ORG) recognises the significant amount of time and expertise that this partnership approach demands of industry, and is grateful for industry’s ongoing commitment to this process.
Interoperability industry panel
The NSW and SA Registrars have convened an Interoperability Industry Panel, comprising the Law Council of Australia, the Australian Institute of Conveyancers, the Australian Bankers Association and ELNOs, PEXA and Sympli. The ACCC is an observer. The Panel is governed by the terms of reference.
The Panel is an important way to inform industry of the ongoing work on interoperability. The peak bodies on the Panel will ensure deep industry engagement across experts in all jurisdictions in Australia, towards a national solution. Panel members will have the opportunity to provide strategic direction for the reform and on implementation.
Further expert work
The NSW and SA Registrars are working with industry experts on specific issues, to develop a national interoperability solution. This more detailed investigation assumes the ‘direct connection’ model (a diagram of this model is below). Both the ACCC and IPART support this model in their recent reports. The workstreams include:
- Regulatory workstream, including a regime to allocate liability and an insurance framework;
- Technical workstream, including cyber security issues; and
- Implementation workstream, including reviewing the costs associated with the regulatory and technical approaches.
Interoperability Technical Working Group
The Industry Panel Chairs, being NSW and SA Registrars, have convened the Interoperability Technical Working Group to identify potential technical approaches to interoperability and investigate issues related to the technical workstream. The working group is governed by the terms of reference and will advise the NSW and SA Registrars accordingly.
The working group is comprised of senior technical representatives from government, the Law Council of Australia, ELNOs and financial institutions. Mr Glenn Archer has been appointed as the Independent Technology Expert and his work will inform and guide ongoing working group discussions.
The working group reflects the NSW and SA goals of working collaboratively with experts on key issues and maintaining industry engagement throughout the process.
For updates on the NSW Government’s progress on interoperability, please subscribe to the Registrar General emails.
The peak body in your State or Territory can also assist with further information.
The South Australian Government also provides an overview on interoperability and the joint NSW/SA work. Please visit the Government of South Australia's eConveyancing website.
What is interoperability?
Interoperability refers to a connection between ELNOs that would allow a customer connected to one Electronic Lodgment Network (ELN) to engage in a conveyancing transaction with another customer who is connected to a different ELN.
Interoperability is widely used by regulators in other industries as the regulatory tool to manage what is called a network effect.
The eConveyancing market is a good example of a market with a network effect because the value of an ELNO’s services provided to any one user increases as more solicitors, conveyancers and financial institutions use that ELNO’s services. This means that larger and more established ELNOs have a competitive advantage over smaller new entrants, since their users can connect with a larger number of other users to complete transactions.
Regulators in networked industries establish rules and standards around interoperability to remove this barrier to new entrants and for real competition to emerge.
Interoperability also gives customers choice and supports competition. Competition can lead to better customer outcomes, including higher quality services, lower prices and ongoing innovation.
Interoperability may take many different forms. A potential model is outlined below. This model was proposed by NSW’s Independent Pricing and Regulatory Tribunal in their final report.
This model of interoperability shows three ELNOs, ELNO A, ELNO B and ELNO C, having direct connections with Land Registries, Revenue Offices, the Reserve Bank of Australia and Financial Institutions. There are also direct connections and information sharing between ELNOs. In each transaction, one of the interconnected ELNOs functions as the lodging ELNO, completing financial settlement and titling functions on behalf of subscribers to each ELNO.
What has happened to date?
ACCC report on eConveyancing market reform
In December 2019, the Australian Competition & Consumer Commission (ACCC) published a report on the emerging eConveyancing market. The ACCC:
- notes the benefits of competition: innovation, price pressure and responsiveness to stakeholder concerns;
- notes that the eConveyancing market is not a natural monopoly - rather, it can sustain a number of ELNOs;
- calls for a clear regulatory framework and a pathway to effective competition, as a matter of urgency;
- identifies interoperability as a pro-competitive market model, and supports further work on the practical aspects of functional interoperability; and
- strongly prefers a nationally consistent approach - but given the urgency, believes that if a national approach cannot be achieved soon, then individual states and territories should progress their preferred approach. Over time, other jurisdictions could replicate this approach.
Independent pricing review
NSW’s Independent Pricing and Regulatory Tribunal (IPART) has reviewed the eConveyancing market and supports interoperability as a driver for innovation and lower costs.
In March 2019, IPART published an Issues Paper on price regulation in the eConveyancing market. The paper noted the benefits of competition.
In August, IPART published a Draft Report again highlighting the benefits of interoperability in the eConveyancing market.
IPART’s Final Report was published in November 2019.
The NSW Government’s response:
Review of the intergovernmental agreement on eConveyancing:
In September 2018, the Australian Registrars’ National Electronic Conveyancing Council (ARNECC) commissioned Dench McClean Carlson (DMC) to review the Intergovernmental Agreement for an Electronic Conveyancing National Law (IGA).
In February 2019, DMC published an Issues Paper reviewing the IGA. The IGA Issues paper included some discussion on interoperability but did not express a preliminary view on whether or not interoperability should be mandated.
In July 2019, DMC published a Draft Final Report suggesting a ‘shallow’ form of interoperability.
In December 2019, DMC published the Final Report for the intergovernmental agreement review. NSW is reviewing the final report.
NSW Government’s response:
NSW forums and working groups:
In December 2018, the NSW Government held a forum on interoperability with key stakeholders including ELNOs, major banks, the NSW Law Society, the Australian Institute of Conveyancers, insurance representatives, the NSW Independent Pricing and Regulatory Tribunal, the Australian Competition and Consumer Commission and the Reserve Bank of Australia.
In February 2019, the NSW Government published a Directions Paper on interoperability and held a second industry forum. The NSW Government, state and national peak industry groups and regulatory bodies identified the need to:
- investigate baseline eConveyancing interoperability requirements that contribute to a nationally consistent ‘end-state’;
- develop workstreams that can be considered with the IGA review; and
- focus on promoting competition, consumer choice and national consistency in the area of eConveyancing.
In March – July 2019, the NSW Government held industry working groups, under an independent chair, Dr Rob Nicholls. The purpose of the working groups was to inform decisions about the way forward with interoperability.