The proposed merger between the Australian Securities Exchange (ASX) and the Singapore Exchange (SGX) has been endorsed by a report from consultancy Access Economics, entitled ”ASX-SGX: why the combination is in Australia's national interest'.
The report, which was commissioned by ASX, is designed to “help inform the debate” about the potential merger, which would result in a new exchange group, ASX-SGX Limited. It concludes that the deal would improve Australia's chances of becoming a financial services hub in Asia, improve the ability of Australians to diversify their savings, and lower the cost of capital for Australian companies.
The document also points out that the merged entity would become the fifth largest securities exchange group in the world by market capitalisation (approximately US$12.3 billion), the second largest listings venue in Asia, and the largest provider of exchange-traded funds, derivative products and real estate investment trusts in Asia.
However, the proposal has been met with strong political resistance from some quarters in Australia, where it is feared that the merger could be dangerous for the Australian securities market since SGX would effectively own a large share of the former ASX's business. In particular, as part of the merger proposal SGX would acquire all the listed shares in ASX by way of an arrangement.
Although the ASX Board has unanimously recommended the proposal, it remains subject to a number of government, regulatory and shareholder approval processes, including a parliamentary process to lift the current ownership restrictions that apply to ASX.
ASX shareholders will have the opportunity to vote on the proposal at a meeting of shareholders expected in Q1 2011. In a release dated 6 December 2010, ASX chairman David Gonski urged all shareholders to visit the ASX website to inform themselves of the merger proposal's benefits.
The plans for a merger with SGX come as the ASX prepares itself for the entry of competition into the Australian market in Q1 2011. The exchange has already taken several measures to upgrade its capacity, improve latency and reduce trading fees in anticipation of the arrival of competitors such as Chi-X Global, which plans to launch its own platform in Australia early next year.
If approved, the ASX-SGX merger is expected to be implemented during Q2 2011.