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Aussie rules

For anyone that doesn’t know, Aussie rules football is a highly physical contact sport that combines elements of rugby and football and is a major participant and spectator sport in Australia. One of the things that makes the game so interesting (and dangerous) is the absence of an offside rule which makes it very hard to predict where any likely ‘contact’ may come from.

Reading the press today it looks like the Australian Stock Exchange is in the middle of its own version of this game. ASX saw the likes of Chi-X Australia early on and so was very quick to introduce a new fee structure, build a new dark order book and invest in co-location centres. The announcement from SGX comes completely out of left field, however, and introduces another dynamic to the global fragmentation game. AsiaPac markets have always worked within highly nationalistic boundaries typified by workflow and regulation designed very much to support the status quo and keep out international venues. A takeover of ASX by SGX would, therefore, be a real game changer and could spark a series of pan-Asian exchange consolidation.

For its part, SGX has always wanted to extend its reach both into Europe and further across Asia and much of its ambition is centred on becoming the Asian gateway for flow into and out of the region. A tie-up with ASX would work at a number of levels as both will use the same technology, both trade equities and derivatives side by side and, by creating the 5th largest exchange in the world (according to the FT article), both would benefit from significant economies of scale. Despite the industrial logic to a combined entity I wonder, though, how the average Australian would feel about losing their national exchange. It was these sorts of emotions that scuppered Deutsche Börse’s attempts to buy the LSE a few years back as it was feared that London’s position at the heart of European finance would be threatened by a German takeover.

Either way, it will be very interesting to see how it plays out. Will we see the deal go ahead and the new entity join the global premier league or will Australia claim it’s all just not cricket?

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