Singapore Exchange, blocked by Australian regulators in its takeover of ASX, is prepared to discuss a merger with other bourses such as Hong Kong, according to President Muthukrishnan Ramaswami.
The exchange isn’t currently working on a “transformational deal,” and is focusing on expanding its clearing services for derivatives, growing company listings and finding collaborative agreements that drive revenue, he said in an interview yesterday at the World Federation of Exchanges IOMA/IOCA conference in Mumbai.
“If Hong Kong came to us and said: shall we merge, we wouldn’t say no at all,” Ramaswami said. “Hong Kong would bring us size. We have no problem being a junior partner. But it would be all about the detail.” There has been no approach or discussion to date, he said.
Singapore Exchange, operator of the city-state’s securities and derivatives markets, had an A$8.3 billion ($11.1 billion) offer to buy ASX rejected by the Australian government on April 8. The deal, unanimously recommended by the companies’ boards, was an attempt to compete with rival exchanges in Tokyo and Hong Kong, where a record $58 billion was raised in equity offerings last year, according to data compiled by Bloomberg.
Record IPOs
Hong Kong Exchanges & Clearing Ltd., the world’s largest listed exchange operator by market value, on March 2 posted its first annual profit gain in three years, as initial public offerings reached a record. Net income rose 7% to HK$5.04 billion ($796 million). On April 19, Singapore Exchange said third-quarter profit fell 10% to $67 million on costs linked to its attempt to buy ASX.
Even accounting for the failed Australian deal, exchanges have announced takeovers totaling about $20 billion since October as competition forced chief executive officers to seek to cut costs by expanding into new markets.
Deutsche Boerse AG agreed a US$9.5 billion purchase of NYSE Euronext that would create the world’s largest exchange operator. London Stock Exchange Group Plc said it will acquire Canada’s TMX Group Inc., owner of the Toronto bourse.
Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. announced a rival offer for NYSE Euronext, which the company’s board has twice rejected.
Boosted Trading
SGX Chief Executive Officer Magnus Bocker, who stitched together eight European stock markets and sold them to Nasdaq four years ago, became president of Nasdaq before joining the Singapore bourse. He boosted trading with the introduction of 19 American depositary receipts of Chinese companies in October and announced a $250 million order processor that may be the world’s fastest when it goes live in August this year.
“We think we can continue to grow,” Ramaswami said. “That’s why we aren’t searching desperately for a partner. We are not in a rush.”
Hong Kong has said it may seek strategic alliances with organizations such as technology providers and “regional and global counterparts” as part of its plan for 2010 to 2012. Hong Kong has a market value of HK$191 billion, while Singapore Exchange’s is $8.4 billion.
“We collaborate with them on a number of things but we’ve never had a ‘should we merge?’ conversation,” said Ramaswami, who will also become chief financial officer of Singapore Exchange from June 11. “We now think collaboration ventures in Asia are more likely than an outright deal. We don’t see an easy deal waiting to happen in Asia.”
Clearing, Settlement
Singapore Exchange operates both trading and post-trade arms for its markets, including clearing and settlement, and may seek partners for any of these businesses, Ramaswami said. The bourse plans to expand the range of derivatives it clears to US dollar-denominated interest-rate swaps and foreign exchange, he said.
“Trading is increasing steadily and we own the whole chain so a collaboration can be in any of these areas,” he said. “If you take Euroclear, Clearstream as settlement partners; LCH.Clearnet, CME, ICE for clearing; and on the futures side: CME, ICE, Liffe, Eurex -- potential exists for all of them. We expect three or four exchange centers to emerge over time in Asia and we’ll be one of them.”
Euroclear is a Brussels-based settlement agency and Clearstream and Eurex are units of Deutsche Boerse AG. LCH.Clearnet Group Ltd. is a London-based clearinghouse. CME Group Inc. and IntercontinentalExchange Inc. operate the two biggest U.S. futures markets. Liffe is NYSE Euronext’s London- based derivates market.
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