Regulator explores effect of Chi-X on SGX/ASX merger
The Australian Competition and Consumer Commission (ACCC), which is responsible for reviewing the competitive aspects of the potential merger between the Singapore Exchange (SGX) and the Australian Securities Exchange (ASX), has identified markets operated by Chi-X Global as a potential hurdle to the deal's completion.
The ACCC, an independent statutory body, started its review of the merger 10 November. The review includes a consultation with stakeholders to assess the likely effect of the deal on the market.
The two areas the consultation focuses on are the competitive impact of the proposed merger on the development of competition between exchanges and associated services, and whether any deal could affect “the proposed entry of Chi-X Australia, Chi-East or other potential suppliers of listing, trading, clearing and settlement, data services...for trading Australian equities or related products”.
Chi-East, a joint venture between SGX and Chi-X Global, began a soft launch process today in Singaporean, Hong Kong and Japanese stocks. The platform was also due to begin trading Australian stocks from today, but this has been postponed after the ASX stopped the supply of its market data to Chi-East.
Chi-X Australia is widely tipped to be the first challenger to the ASX's monopoly on equities trading following the transfer of supervisory responsibilities from the ASX to national regulator the Australian Securities and Investment Commission earlier this year. Chi-X Australia had planned to launch in Q4 this year, but this has been delayed after ASIC opened a consultation on market structure issues, including competition, that will result in the publication of guidance no earlier than February 2011.
The ACCC paper includes questions on the potential impact of Chi-East in terms of the type of orders likely to be found on the platform, its impact on the price and quality of service and innovation by the ASX and the restrictions that could limit the ability of Chi-East to compete if the two exchanges merged.
The ACCC, whose review of the merger is confined to its competitive consequences, has set a deadline for 1 December 2010 for receiving responses to its consultation.