THE London Stock Exchange is in talks with exchanges in Singapore and Australia to trade shares listed on each other's bourse, the Financial Times has reported.
The London exchange agreed last week to buy clearing house LCH.Clearnet Group, according to the newspaper. It will clear Singapore stocks traded in London and British stocks traded on the Singapore Exchange.
The London-listed exchange is also in talks for a similar agreement with the ASX, the report said.
"It is a well-known fact that we are always open to opportunities to grow SGX as the Asian gateway," Joan Lew, a spokeswoman for Singapore Exchange, said. "We do not comment on market speculation."
ASX is considering offering trading in stocks listed on other exchanges, but it hasn't decided on specific securities or locations, a spokesman for the exchange, Matthew Gibbs, said. He declined to comment on the Financial Times report.
Stock exchanges from London to Sydney are looking at ways to expand their business after having proposed mergers rejected last year.
A $US8.8 billion ($8.3 billion) bid by Singapore Exchange for ASX collapsed after the Treasurer, Wayne Swan, said the deal wasn't in the national interest. London scrapped its $US3.4 billion bid for TMX Group, owner of the Toronto Stock Exchange, after failing to win support from TMX shareholders.
Last year, more than $US37 billion in announced mergers between exchange companies failed to go ahead, according to data compiled by Bloomberg on deals valued at $US1 billion or more.
"In Asia, cross-border mergers and acquisitions are largely off the table," a Hong Kong-based analyst at Keefe Bruyette & Woods, Sam Hilton, said. Anything that provides a "low-cost" way to expand is "incrementally positive", he said.
The success of the reported London Stock Exchange plan would depend on the mechanisms of trading and how much it cost the exchange and investors, Mr Hilton said. He noted that matching buy and sell orders on LCH.Clearnet may lower costs, but without details of how the plan would work, it was too early to tell. Last week's announcement by the London exchange on its LCH.Clearnet purchase led the stock to rally more than it had in eight months.
Tony Weeresinghe, the London exchange's director of global development, told Bloomberg News in October about three unnamed partnerships to allow cross-trading of stocks on international bourses.
"This will appeal to global investors, allowing people to buy stocks internationally," he said. Exchanges "can encourage companies to come list and get the best of both worlds. We get to share the trading revenue".
Mr Weeresinghe said trades would be settled and cleared in the stocks' home countries while offshore investors would fully own the shares. He declined to name partners pending a formal announcement.
Singapore Exchange has rallied 16 per cent this year and was up 0.3 per cent to $S7.10 yesterday. ASX rose 0.1 per cent to $A31.19. London fell 0.3 per cent in trading, closing at to 998.5 pence.
Frequently Asked Questions about this Article…
What is the London Stock Exchange proposing with the Singapore Exchange and ASX?
According to the article, the London Stock Exchange (LSE) is in talks with exchanges in Singapore and Australia to allow trading of shares listed on each other's bourses. The LSE has also agreed to buy clearing house LCH.Clearnet Group, which the report says would clear Singapore stocks traded in London and British stocks traded on the Singapore Exchange (SGX).
How does the LSE’s purchase of LCH.Clearnet relate to cross-border trading?
The article says the LSE’s agreed purchase of clearing house LCH.Clearnet would enable clearing of Singapore stocks traded in London and British stocks traded on SGX. Analysts note matching buy and sell orders through LCH.Clearnet could lower costs, though success will depend on the trading mechanisms and exact costs to exchanges and investors.
What does “cross-trading” between international exchanges mean for everyday investors?
The article explains that cross-trading arrangements would let global investors buy stocks internationally while trades are settled and cleared in the stocks’ home countries. London Stock Exchange executives say offshore investors would fully own the shares they buy, and such arrangements could make it easier to purchase foreign-listed stocks without switching listings.
Will offshore investors fully own shares bought through these proposed cross-border trading arrangements?
Yes. The article quotes the London exchange’s director of global development saying trades would be settled and cleared in the stocks’ home countries and offshore investors would fully own the shares, while details and partners remain subject to formal announcements.
Could these cross-exchange plans reduce trading costs for investors?
Possibly. A Hong Kong-based analyst cited in the article said matching buy and sell orders on LCH.Clearnet may lower costs. However, he also cautioned that without details on how the plan would work it is too early to know the net effect on costs for investors.
Why are stock exchanges exploring cross-border trading instead of mergers?
The article notes many proposed exchange mergers were rejected last year, so exchanges from London to Sydney are looking at other ways to expand. In Asia, cross-border mergers and acquisitions are largely off the table, so low-cost alternatives like cross-trading partnerships are seen as incrementally positive for growth.
Have political or regulatory concerns affected past exchange deals?
Yes. The article points out that Singapore Exchange’s US$8.8 billion bid for ASX collapsed after Australia’s Treasurer said the deal was not in the national interest, and the London exchange scrapped a US$3.4 billion bid for TMX Group after failing to win shareholder support. It also notes more than US$37 billion of announced exchange merger deals failed last year.
How have the exchanges’ share prices been performing amid these talks?
The article reports that Singapore Exchange (SGX) rallied 16% so far this year and was up 0.3% at S$7.10 yesterday. ASX rose 0.1% to A$31.19, while the London exchange fell 0.3%, closing at 998.5 pence.
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