-- Australia's ASX plans direct connectivity tie-up with Singapore's exchange
-- ASX says could role out model across international network, eyes London
-- ASX executive says deal doesn't foreshadow another merger attempt with SGX
(Adds comments from ASX's General Manager of Trade Execution from second paragraphs.)
By Caroline Henshaw
SYDNEY--Australia's dominant stock exchange is deepening its links with its former merger hopeful in Singapore in a bid to drive more international trading volumes at a time of slowing domestic growth and consolidation across the industry.
ASX Ltd. (ASX.AU) said in a statement on Wednesday that it and Singapore Exchange Ltd. (S68.SG) will host hubs belonging to each other in their own data centers from September with the aim of increasing the flow of futures activity between the two exchanges.
Around 6% of futures and options volume on the ASX 24 market is generated from the Australian exchange's global hub network across the U.S., U.K. and Hong Kong as well as Singapore, said ASX's General Manager of Trade Execution Information Services David Raper. He hopes that the new deal will drive "significant" growth in international investment flows by making it easier and cheaper for offshore investors to access the Australian market and local traders to send money offshore.
Should the new tie-up succeed in growing ASX's global business--an outcome Mr. Raper said he is "very confident" will be visible within months of the launch--Australia's main exchange operator could roll out the model to its other international hubs, with London likely next in line.
"Our Chief Executive [Elmer Kupper] has been out there saying its much more likely that we'll see this kind of cooperation between exchanges," Mr. Raper said in an interview. "The real value for us and SGX is seeing how we work together on this. Assuming this model works, we would look to extend this to other centers."
The move comes more than a year after Australia's government shot down an A$8.4 billion takeover proposal for ASX from the Singapore exchange on the grounds it was against the national interest. Since then, SGX Chief Executive Magnus Bocker has publicly played down the bourse's designs on growth through mergers and acquisitions and stressed it would focus on organic growth through new products and increased connectivity with other global exchanges.
Last week, SGX dismissed reports that it was considering an $11.3 billion merger with the London Stock Exchange.
Mr. Raper said the tie-up between ASX and SGX has "nothing to do with the merger" and there were no plans to reignite the deal. But he added that ASX remains "open to all sorts of cooperative relationships" with other exchanges amid the wave of consolidation in the industry that has seen billions of dollars of deals announced in recent years.
Commonwealth Bank of Australia analyst Ross Curran said ASX's announcement signalled a push for "closer integration to the region which should keep the authorities relatively comfortable" but agreed that it wasn't the next step toward another merger attempt, as this was "well and truly rebuffed" a year ago.
This month SGX signed a cross-quotation agreement with the LSE that will allow the largest and most actively traded stocks on each exchange to be traded by their respective member firms. SGX has also pushed for further tie-ups with other bourses in Southeast Asia through the Asean Exchanges alliance.
ASX too has been looking to expand its dark pool offerings and trading hours to capture more Asian business as trading volumes have slumped and it has faced increasing competition from Nomura-backed rival Chi-X. The Australian exchange on Wednesday also released new rules allowing companies with a value of less than A$300 million to raise up to a quarter of their share capital every 12 months in a bid to attract more listings from small miners.
The step is also particularly significant as officials are currently consulting on whether to open up Australia's clearing and settlement sector to more competition. LCH Clearnet, which is owned by the LSE, is in the process of lodging an application with the Australian Securities and Investments Commission in the hope of setting up an Australian operation, according to a person familiar with the matter.
"SGX is delighted to enable easier and more cost effective connectivity offerings at a time when investors are increasingly using exchange-traded derivatives to manage risks in the various global marketplaces," said SGX President Muthukrishnan Ramaswami in the statement.
-- Sam Holmes in Singapore contributed to this article.
Write to Caroline Henshaw at firstname.lastname@example.org
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(END) Dow Jones Newswires
July 25, 2012 02:55 ET (06:55 GMT)
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