Hsieh Fu Hua, CEO of the Singapore Exchange (SGX), has outlined provisional clearing and settlement arrangements for a pan-Asian stock exchange.
At the 12th general meeting of the Asia-Pacific Central Securities Depository Group on Monday, Hsieh proposed that any Asian cross-border trading initiative should be accompanied by clearing and depository links between the countries involved.
The Association of Southeast Asian Nations (ASEAN) has been exploring the idea of an electronic cross-border trading platform, in keeping with the association’s desire to establish closer links between its member’s capital markets by 2015. The exchanges involved are SGX, Indonesia Stock Exchange, Vietnam’s Ho Chi Minh City Stock Exchange, Bursa Malaysia, the Philippine Stock Exchange and the Stock Exchange of Thailand. The exchanges in Korea and Tokyo have also been invited to share their thoughts.
At present, it is proposed that an ASEAN trading board would consist of the 30 “best” or most liquid stocks from each exchange involved in the project. It is intended that investors will be able to trade ASEAN stocks through their own local brokers, who will then use a corresponding broker in the home market where the stock is listed. Trading of stocks will continue to be subject to the rules of their own individual markets.
“SGX has proposed that the trading board be accompanied by clearing and depository links, which will enable better management of risks and settlement failures,” said Hsieh. “This will also reduce costs for overseas brokers, who will only need to build back-office structures in their home markets. The creation of multilateral clearing links is a natural precursor to the integration of trading platforms, paving the way for a more liquid, lower risk and cost-efficient pan-Asian market.”
Talks between ASEAN members are ongoing. A statement issued by SGX to The Trade read, “SGX continues to work closely with the ASEAN exchanges to pursue possibilities and work out the feasibility of the project. As such, the details and time frame have yet to be established.”