The Australian Competition and Consumer Commission (ACCC) has cleared the potential merger between the Australian Securities Exchange (ASX) and the Singapore Exchange (SGX) after examining the potential impact of Chi-X Global on the deal.
After consulting with market participants and reviewing the proposed acquisition under section 50 of the Trade Practices Act 1974, the ACCC concluded that the proposed acquisition was unlikely to impact competition between trading venues.
“For the ACCC to oppose a merger, it must substantiate a lessening of competition that results from the proposed acquisition itself.
The ACCC found that the proposed acquisition was not the cause of the concerns about access,” said ACCC chairman Graeme Samuel.
The merger of ASX and SGX, if approved, would form a new holding company – ASX-SGX Limited – that would be listed on both the Singaporean and Australian exchanges. The combined group will be the world's fifth largest exchange group with a combined market capitalisation of approximately US$12.3 billion and offer access to more than 2,700 listed companies from 20-plus countries as well as a wide range of equity, fixed income and commodity derivatives.
The key focus of the ACCC investigation was to examine whether the merger between the two exchanges would affect the entry of Chi-X Australia or the operation of Chi-East, Chi-X Global's joint dark pool venture with SGX.
Chi-East launched on 11 November, offering trading in Singaporean, Japanese and Hong Kong stocks. It was due to start offering Australian stocks from launch but was not able to after the ASX prohibited Chi-East from using its data feed. The ACCC noted that some market participants had raised concerns about “access by third parties to the ASX’s market data, clearing and settlement facilities for the purpose of providing competing platforms for the trading of ASX-listed shares”.
Chi-X Australia plans to launch in 2011 following the transfer of supervisory powers to national regulator the Australian Securities and Investment Commission (ASIC) from the ASX earlier this year.
“Given SGX’s 50% ownership in Chi-East, the ACCC considered that the proposed acquisition may alter the economic incentives of Chi-East to compete with the merged entity,” said Samuel. “However, the ACCC found that the extent to which Chi-East and the ASX would compete in relation to dark pool trading services is limited. Market inquiries indicated that dark pools which are located offshore are unlikely to compete with dark pools located in Australia. Further, there are a number of dark pool providers who would continue to constrain a merged ASX/SGX.”
The merger is still awaiting further approval from both sets of shareholders, the treasurer of the Commonwealth of Australia, ASIC and the Monetary Authority of Singapore, the country's financial regulator.