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National interest or political self-interest?

Few can have missed the announcement that the proposed merger between ASX and SGX is about to be halted by Wayne Swan, Australia’s Treasurer. He cites the deal as contrary to the national interest which, of course, has been a concern raised by the Canadian authorities in their review of the proposed merger between their own TMX Group and the London Stock Exchange.

I wonder if it’s complete coincidence that both Australia and Canada are in particularly sensitive political waters right now. The Australian legislature effectively suffers from a hung parliament and Canada faces close elections too. The challenge for the politicians then is that for the man on the street these deals do look like a sell-off of national assets and so there is little political capital to be gained by approving them. On the other hand, a look at the reduction in the domestic shares of the LSE or TMX tells another story. ASX, too, will face competition from Chi-X later this year and so all these venues run the risk of being increasingly marginalised. Now is the time for these exchanges to bulk up and form global alliances as it’s unlikely they will reverse their domestic fortunes. The concept of a national stock exchange may fast become a quaint anachronism as capital markets continue to globalise at an ever-faster rate.

When the financial regulators of these countries first introduced their domestic exchanges to the concept of competition, they should have understood that the current wave of mergers was going to be an inevitable consequence. Why should stock exchanges be any different from airlines, automobiles or pharmaceuticals which have all globalised to meet the practical realities of their industries?

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Comments: (2)

A Finextra member
A Finextra member 07 April, 2011, 19:47Be the first to give this comment the thumbs up 0 likes

Hi Steve

 

I make you dead right on this. History will show this as just a moment in time as natural selection dictates global structure. I still think the main Stock Exchanges will dominate but regionally. Not sure there is much of a future for MTFs long term

Steve Grob
Steve Grob - Fidessa - London 12 April, 2011, 15:50Be the first to give this comment the thumbs up 0 likes

Thanks for your comment Gary. I agree that the big exchange groups will dominate but think there’s still a viable role for the niche MTF players – I covered this subject in more detail a recent video blog http://fragmentation.fidessa.com/2011/03/01/feeding-frenzy/