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Australian regulator okays Singapore bourse merger

In Uncategorized on December 16, 2010 at 9:45 am

Australia’s competition watchdog said it will not oppose an 8.3 billion US dollar merger between the Australian and Singapore stock exchanges to create the world’s fifth biggest bourse.

In a move which brings the deal one step closer, the Australian Competition and Consumer Commission said a Singapore Exchange Limited (SGX) and Australian Securities Exchange (ASX) merger would not substantially lessen competition.

“In Australia, SGX does not compete with ASX for trading, clearing or settlement services,” it said in a statement on Wednesday.

“ASX and SGX do compete for listing services, but only to a limited extent.”

Granite facade of the Australian Stock Exchange (ASX) in Sydney is seen in this file photo

The deal, which is hoped will create a regional trading hub to rival Hong Kong, is also being reviewed by Australia’s securities and foreign investment watchdogs, as well as the central bank, and must be approved by the Treasurer.

Australia’s parliament, where the centre-left government of Prime Minister Julia Gillard holds just a one-vote majority in the lower house — will then have to pass a bill that would allow the deal to go ahead.

The ASX welcomed the decision.

“Our focus continues to be on satisfying the regulatory process that is well under way,” an ASX spokesman told Dow Jones Newswires.

The Australian Competition and Consumer Commission (ACCC) said it focused its investigation on whether the proposed merger would affect a joint venture agreement between SGX and another company, Chi-X Global.

But it said the Singapore exchange’s 50-50 venture with Chi-X Global would not alter Chi-X’s wholly owned subsidiary Chi-X Australia’s incentives for establishing a trading venue to compete with the ASX.

The ACCC also rejected market concerns about access by third parties to the ASX’s market data, clearing and settlement facilities for the purpose of providing competing platforms for trading Australian-listed shares.

The Singapore bid has sparked a strong political backlash in Canberra, where key independent lawmakers have questioned Singapore’s human rights and democracy record and argued that the deal would disadvantage Australia.

But Australia’s stock exchange chief has lauded the proposal, saying the nation would benefit from a stock exchange with a heftier market capitalisation of 12.3 billion US dollars.

The deal would increase the size and diversity of options for investors and reduce costs for listed companies — “an outcome unequivocally in the national interest”, ASX chief executive Robert Elstone said earlier this month.

“The need for additional scale and regional relevance makes ASX’s participation in exchange consolidation a mandatory, not an elective, matter for all of its stakeholders, and not just its shareholders,” he said.

Elstone said the merger was the “natural competitive and regulatory evolution of Australia’s capital markets” given the rise of Asia as their economies industrialise.

The competition watchdog had been expected to approve the deal which is scheduled to complete in mid-2011, but one analyst at Wilson HTM Securities, Andrew Hills, said the Foreign Investment Review Board (FIRB) and the government would prove greater obstacles.

“The big hurdle is FIRB and passing both houses of parliament,” Hills told Dow Jones Newswires.

Source: SGGP

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