SYDNEY, April 8 (Reuters) - Australia formally rejected Singapore Exchange Ltd’s $8 billion bid for ASX Ltd and said major reform of the nation’s financial system was required before the ASX could be bought.
The following are comments from Treasurer Wayne Swan on Friday on why he rejected the deal and what reforms are needed.
“I have been advised that many of the claimed benefits of this transaction are likely to be overstated. To diminish Australia’s economic and regulatory sovereignty over the ASX could only be justified if there were very substantial benefits for our nation, such as greatly enhanced opportunities for Australian businesses and investors to access capital markets.
“Given the size and nature of the SGX -which is a smaller exchange with a smaller equities market than the ASX - the opportunities that were offered under the proposal were clearly not sufficient to justify this loss of sovereignty.
“The ASX also operates infrastructure that is critically important for the orderly and stable operation of Australia’s capital markets. Both the Reserve Bank of Australia (RBA) and the Australian Securities and Investments Commission (ASIC), carefully review the operations of the ASX on an ongoing basis and have been satisfied that it is meeting its obligations and remains a robust operation.
“However, FIRB’s recommendation, which incorporated advice from ASIC, the RBA and the Australian Treasury, was that not having full regulatory sovereignty over the ASX-SGX holding company would present material risks and supervisory issues impacting on the effective regulation of the ASX’s operations, particularly its clearing and settlement functions.
“Australia’s financial regulators have advised me that reforms to strengthen our regulatory framework should be a condition of any foreign ownership of the ASX to remove these risks.
“To address these issues, I have asked our Council of Financial Regulators to establish a working group to consider potential measures which could be introduced to ensure our regulators can continue protecting the interests of Australian issuers, investors and market participants.
“A key consideration would be preserving the integrity of our financial infrastructure and the strong ability of our supervisors to maintain robust oversight in all market conditions, including in the event of a future commercial arrangement between the ASX and another exchange.
“Subject to regulatory reform, I do not in principle oppose commercial arrangements involving the ASX and a global exchange that would:
* Protect the integrity of Australia’s financial architecture and regulatory framework
* Build Australia’s standing as a significant financial services centre in Asia
* Increase Australia’s integration into global capital markets and exchange networks
* Meaningfully boost access to capital for Australian businesses
* Support growth in high quality financial services jobs in Australia
* be consistent with increased competition between financial exchanges in Australia (Compiled by Balazs Koranyi)