Treasurer Wayne Swan's measured announcement of the reasons for prohibiting the acquisition of the Australian Stock Exchange (ASX) Ltd by the Singapore Stock Exchange (SGX) provides a solid explanation of the reasons why the deal was turned down, and clear exposition of what is required for an arrangement between the ASX and another global exchange.
The terms the Treasurer has set out that any proposed deal must meet are substantial and convincing: protecting the integrity of Australia's financial architecture and regulatory framework; building Australia's standing as a significant financial services centre in Asia; increasing Australia's integration into global capital markets and exchange networks; meaningfully boosting access to capital for Australian businesses; supporting growth in high-quality financial services jobs; and being consistent with increased competition between financial exchanges in Australia.
These are all vital prerequisites for confidence in any consolidation of the ASX with other exchanges overseas. To suggest that the ASX has missed the boat in not being taken over by the SGX is facile. There will be many opportunities in future for the ASX to prove its enduring robustness and significant contribution to the Australian economy. There will be other opportunities to work towards an agreement with a major overseas exchange for greater collaboration.
The London Stock Exchange's current bid for the Toronto Stock Exchange, and DEutsche Boerse's bid for NYSE Euronext, with the rival NASDAQ OMX bid, indicate a highly fluid context. It is perfectly possible that the AX will be able to negotiate in the future a far more attractive merger with a much better established global player than the SGX. And to respect the requirements the Treasurer has insisted on regarding the regulatory and competitive implications, together with the ambitions to promote Australia as a finance centre, and enhance access to capital.
The beat-up on Swan over his consideration of his ASX-SGX deal, which is of the greatest significance to the strategic future of Australia's economy, has at times seemed opportunist and unprincipled. It is rare that all of Australia's regulatory ducks line up in a neat row, but we have the Australian Securities and Investments Commission, the Reserve Bank of Australia, the FOreign Investment Review Board and Treasury all accepting that "the opportunities that were offered under the proposal were clearly not sufficient to justify this loss of sovereignty."
Many will agree with the Treasurer's comment on the ASX-SGX deal that "the claimed benefits of this transaction are likely to be overstated." The apparent enthusiasm for the takeover of the ASX by the smaller SGX from the scions of the Australian business establishment, which has been maintained from the first announcement of the bid to the announcement of its failure, is slightly baffling.
If the opportunities are as considerable as leading business people are claiming, why was there not an ASX bid for the SGX?
Professor Thomas Clarke