It was another time, and another government — and an example of how foreign investment doesn’t always turn out for the best.

Six years ago, in October 2010, the Singapore Stock Exchange — part-owned by the Singaporean government — and the ASX announced that the Singaporeans had offered $8.4 billion for the Australian exchange. The business community lauded the deal and shareholders who stood to make huge profits from it were eager for the government to wave it through.

But in April the following year, then-treasurer Wayne Swan knocked them back, to the fury of business leaders like ANZ’s Mike Smith and the Business Council, and even academics. Joe Hockey, then-shadow treasurer didn’t have an opinion on the bid, but managed to criticise Swan anyway (the news was leaked early).

It might seem ancient history now, but recent figures starkly underline what a dud deal it would have been for Australia and ASX shareholders — despite the active encouragement for the deal by Maurice Newman (the former ASX head), David Gonski, then chair of the ASX and assorted urgers and coat-tuggers. ASX shares are now just below $48, compared to around $22 at the time of the bid, having recently reached above $50. But it’s the market performance of the two exchanges that continue to undermine the rationale for the offer nearly six years on.

According to the August update from Singapore, market turnover crashed in August, falling at its fastest annual pace in more than two years. Total market securities have fallen 27% since August 2015, and the average daily securities value was down 37% year-on-year in August to S$396 million (about A$384 million); the turnover value of exchange-traded funds was down by a quarter, month-on-month, and down by one-third from a year ago, to S$207 million. Only one company listed on the SGX main board in August, raising S$195.1 million, while 36 new bond listings raised S$20.9 billion. Derivatives volume rose 7% from July, but was down 19% from August last year (there was a 40% plunge in July when the exchange didn’t trade for a day because of a glitch — of which more in a moment).

In contrast, earlier this week, the ASX released its monthly trading report for August, showing a 5% year-on-year drop in the value of cash market trading last month to A$109.48 billion (the bread and butter for markets, investors and brokers and why an exchange exists) although the total number of trades was up 23% from August 2015. But 16 new companies were listed in August, up from five a year earlier; in August, total capital raised was $6.2 billion, down 12% on the previous corresponding period. The average daily turnover on the ASX in August was A$4.1 billion (about S$4.22 billion), down 15% from August 2015, and that’s the key measure.

In other words, the daily volume on the ASX is more than 10 times that on the SGX, with the fall on the Singapore exchange over the past year more than double compared to the ASX. More money is being raised on the ASX, more companies are being listed and there’s more activity.

This week, of course, the ASX was making news for the wrong reasons, with a major outage on Monday that is now under investigation. According to its website, the ASX trading platform, ASX Trade, “is a NASDAQ OMX ultra-low latency trading platform based on NASDAQ OMX’s Genium INET system, which is used by many exchanges around the world. It is one of the fastest and most functional multi-asset trading platforms in the world, delivering latency down to ~250 microseconds.”

But this isn’t the first problem involving exchanges using the Nasdaq OMX trading system: that glitch on the Singapore Exchange in July involved its GENIUM platform, another one developed by NASDAQ OMX.

In fact, when ASX and the Singaporeans announced the deal six years ago, they promised “leading exchange technology, including the proposed introduction of the world’s fastest trading platform with the lowest trading latency, and flexible data and connectivity solutions.” Presumably that was one platform across both exchanges, which would have made for a day of double embarrassment when it fell over. It’s no wonder regulators, led by the RBA, APRA, ASIC and federal Treasury, were worried about the merger and the loss of sovereignty for Australian sharemarkets back then — whom would they and investors have asked for answers if Monday had happened on a merged Singaporean platform?

Not that too many investors will be remembering to thank Swanny for his naysaying.

Peter Fray

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