Following the acquisition of the LME by Hong Kong Exchanges and Clearing, the launch of the ASEAN Trading Link is the latest sign that Asian markets are joining global trends.
The ASEAN link went live recently, linking Singapore Exchange and Bursa Malaysia members and traders, completing a project started five years ago. Perhaps it was only natural that Asia should pick up on one of the latest developments in capital markets:
interconnectedness.
While full-blown mergers and acquisitions between stock exchanges, especially cross-border, are probably off the table for now – the last year has seen quite a few memorable failed attempts, NYSE Euronext/Deutsche Boerse, LSE/TMX, ASX Group/Singapore Exchange
– there are repeated examples of ambitious capital market linkages across the globe since the turn of the century. Euronext, before “merging” with NYSE, unified the stock exchanges of Amsterdam, Brussels, Lisbon and Paris; CEESEG, the Central and Eastern Europe
Stock Exchange Group, today brings together under Vienna’s leadership the Austrian, Czech, Hungarian and Slovenian financial markets, with an eye for further expansion in South East Europe; NASDAQ OMX, bringing Nordic and Baltic stocks trading under a common
uniform. The movement is not confined to Europe, as the recent launch of MILA – Mercado Integrado Latino-Americano showed, which links the financial marketplaces of Bogotá, Lima and Santiago.
So is the ASEAN Trading Link, the symbol of deepening economic and political integration in South East Asia, realizing the aspirations of millions of people to live in a more peaceful, integrated bloc? Or is it simply that each of the underlying venues was
reaching its local potential and needed to find new avenues to attract new sources of capital and new investors? Most probably both, with the added interest that it is hard to exist when living in the shadow of the Chinese cloak.
The advantages of capital markets linkages are clear, and relatively well known: linking trading venues without any losing their identity, opens new opportunities for business, the possibility for ambitious local players to access new sources of wealth creation
and the means to fight off larger financial powerhouses – or at least compete with them. Such links also give stock exchanges the occasion to take a short breath before the next step, which could either involve departing sensationally from that first route
(cue the acquisition of Euronext by NYSE) or instead facilitating further integration.
It will be intriguing to see what the next steps for the ASEAN Trading Link turn to be, beyond the integration of Thailand and the probable acquisition of new participants (Indonesia, Philippines, etc.) already members of the ASEAN political grouping. An
initial success could lead its members to become bolder and target other services, thereby further reducing inefficiencies in the trading chain in Asia: common rule book, foreign ownership, remote membership, clearing and settlement, single trading system,
pooling of IT resources and spend, etc. Conversely, this could also give the possibility for the ASEAN Trading Link participants to engage in (more or less) collaborative approaches to other regional participants – the new Japan Exchange Group could be an
early target for cooperation, as it seeks to revive the economic fortunes of Japan and the competitiveness of the Nippon financial markets, but Australia or even India could also be brought into the fabric of the trading link.
What the ASEAN Trading Link ultimately does, is heap further pressure on those regions where the lack of any such successful collaboration is becoming glaringly obvious. The very different cases of Africa and the Middle East come to mind – regions where
the current status quo state of affairs with regard to trading and cross-border initiatives might attract the grade “can do better.” ASEAN success could well trigger changes well beyond its original borders and immediate surroundings.