The Australian Competition and Consumer Commission has cleared the proposed acquisition of ASX Limited (ASX) by Singapore Exchange Limited (SGX).Prime Minister Julia Gillard's Labor Party holds 72 seats in of the 150-seat House of Representatives, and onl
The Australian Competition and Consumer Commission has cleared the proposed acquisition of ASX Limited (ASX) by Singapore Exchange Limited (SGX).
Prime Minister Julia Gillard’s Labor Party holds 72 seats in of the 150-seat House of Representatives, and only governs with the support of Greens MP Adam Brandt and three independents on confidence and supply matters.
And one of the independents, Bob Katter, has been vocal in his opposition to the unpopular deal, which one analyst told NBR would be "political suicide" to support.
There are a number of conditions that need to be met for the $A8.4 billion transaction to go ahead. The parties need the sign-off from the Foreign Investment Review Board (FIRB) and the Treasurer, Wayne Swan, to assess whether the deal meets the national interest test. Parliament also needs to lift ASX's 15% ownership cap.
Despite the regulatory approval the ASX faces a huge challenge sealing the deal, which faces strong political opposition in Australia.
The ACCC reviewed the proposed acquisition under section 50 of Australia’s Trade Practices Act 1974, which bans mergers that would have the effect of “substantially lessening competition” in a market.
In Australia, SGX does not compete with ASX for trading, clearing or settlement services and they compete for listing services “only to a limited extent”, the ACCC said.
The key focus of the ACCC's investigation was whether the proposed acquisition would deter the entry of ASX rival operator Chi-X Australia Pty Ltd (CXA) or Chi-East, because of a joint venture agreement SGX has with Chi-X Global (CXG).
SGX has a 50-50 joint venture with Chi-X Global to establish Chi-East, which plans to offer an offshore "dark pool" that will list ASX listed securities.
Dark pools provide electronic trading in securities where buy and sell orders are not transparent to the market.
“The ACCC found that the joint venture relationship between SGX and CXG would not alter CXA's incentives to establish a lit trading venue in Australia and noted that SGX has no economic interest in CXG," ACCC chairman Graeme Samuel said.
"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.
“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."
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