The Australian Securities Exchange (ASX) and Singapore Exchange (SGX) have bolstered the governance arrangements and service commitments made in their merger proposal, following a series of meetings with stakeholders.
The amendments appear to have been made in response to the political resistance 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. But cross-border exchange mergers that have been proposed since, between the London Stock Exchange and Canadian exchange group TMX, and Deutsche Börse and NYSE Euronext, seem to support the ASX-SGX model.
“Recent developments in global exchange mergers affirm the judgement of the ASX Board that ASX must participate in regional and global consolidation,” said David Gonski, chairman, ASX. “The changes and commitments announced today, combined with existing regulatory protections, strengthen our belief that the ASX-SGX merger proposal is in the best interests of shareholders and in the national interest of Australia.”
“The recent merger announcements from LSE/TMX and Deutsche Börse/NYSE Euronext underscore the dynamic forces that are driving developments across the world's major licensed exchange market operators,” added Robert Elstone, managing director and CEO, ASX.
Under new governance arrangements, the board of the combined ASX-SGX Limited group will include five Australian and five Singaporean citizens, rather than two of each as previously agreed. The remaining three board places will include three international directors, one of which will be Magnus Böcker, the current CEO of SGX, and ASX-SGX managing director and CEO designate of the merged group. Chew Choon Seng, the current chairman of SGX, will retain his position at the combined entity, while Gonski will take the position of deputy chair as well as chairing the ASX-SGX integration committee, to ensure a smooth transition.
For trading members, the updated proposals include a new range of initiatives that will leverage the combined strengths of the two exchanges. This includes: cross-listing and cross-access services; the ability for holders of ASX and SGX derivatives positions to consolidate their exposures under mutual offset arrangements; an Australian dollar interest rate swaps clearing facility for over-the-counter contracts and; the development of wholesale and retail fixed income platforms.
The ASX's trading operations, including listing, trade, execution, data services, clearing and settlement, will continue to be located in Australia and operated by Australian incorporated entities. The fees charged for Australian trading services will be entirely responsive to the commercial environment in Australia and independent of the fees charged in Singapore.
Trading that takes place in Australia will continue to be licensed under the country's Corporations Act, with oversight and annual assessment responsibilities retained by national regulator the Australian Securities and Investment Commission and the Reserve Bank of Australia.
The combined group has also committed to a capital expenditure of at least 5% of Australian operating revenue per year to fuel growth of the new company, with a minimum investment of A$30 million within the first five years.
The initial merger agreement announced on 25 October 2010 will be updated with the commitments, after which the SGX will lodge a formal application with the Australian Foreign Investment Review Board.