Those gouging monopolists at the ASX this morning revealed
they are having another try at merging with their rivals at SFE Corp,
the old Sydney Futures Exchange which demutualised in 2000, in
a $2.3 billion deal that will create the world’s ninth biggest listed
exchange.

ASX is paying a big price to get SFE board endorsement by proposing to
deliver 40% of the combined group to SFE shareholders who will receive
0.51 ASX shares for each SFE share. Based on ASX’s Friday closing price
of $32.60, this valued SFE shares at $16.63 – a hefty 25% premium to
recent trading and more than eight times the lows of $2 reached in late 2002.

It will be interesting to see whether ASX refers trading in SFE shares
to ASIC for a formal insider trading investigation because SFE shares
soared from $12.75 on March 10 to Friday’s close of $14.12 as news of the proposed merger leaked out.

SFE shares are up another $2.88 to a record $17 this morning after
peaking at $17.60 whilst ASX shares have also soared $1.31 to $33.91,
meaning today’s proposal has lifted the combined market
capitalisations of the wedding partners by $540 million at 11.30am to a
record $5.8 billion.

The ASX has long been Australia’s most lucrative
government-endorsed monopoly. The 606 original stockbroking owners of
the ASX, back when it was a mutual serving the
investing public in a not-for-profit way, have seen their $25,000
investment turn into more than $6 million. These fat cats paid just 15c
for each of their 166,000 shares in the demutualisation, meaning they
have enjoyed an almost 300-fold return when dividends are included.

There aren’t too many other businesses that generated EBITDA margins of
58% in 2005 but the ASX’s $291 million in revenue translated into
operating earnings of $169 million last year. That’s what you call
gouging, yet the ACCC and the Federal Government are tolerating more
price increases from July next year and the competition regulator has
already given preliminary approval for this merger which will hugely
increase ASX market power. Has anyone considered the long-suffering
consumer in all of this?

Maurice Newman, the PM’s great mate who has chaired the ASX for a
decade, will be chairman of the combined business into the future
despite turning 68 next month, whilst ASX CEO Tony D’Aloisio will be
CEO. SFE will score three ASX board seats.

Australia was a global leader in creating the hugely conflicted
situation of turning a regulator into a profit-motivated listed company
and ASX and SFE are proposing to merge their surveillance and
supervision operations into one entity. Is this really in the public
interest? How many market integrity types will be axed in the pursuit
of “synergies”?

Australia is great at producing service sector giants that rely on
government concessions to gouge their customers and this deal will make
the ASX a leading example. Sadly, all this ASX wealth is coming from
the long-suffering mum and dad investors who have their superannuation
tickets clipped every which way by a government which seems to have
little concern about ever-concentrating Australian corporate power.

Peter Fray

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