The Australian Competition and Consumer Commission will not oppose the merger between the Australian Stock Exchange and the Sydney Futures Exchange, ACCC Chairman, Mr Graeme Samuel, said today.
"The ACCC considers the proposed acquisition is unlikely to substantially lessen competition given the strong evidence that the ASX and SFE are separate monopolies, and to a large extent do not compete already, nor are they likely to substantially compete in the future", Mr Samuel said.
"The ACCC received no persuasive evidence that the current lack of competition between the ASX and SFE was likely to change in the foreseeable future", Mr Samuel said. "Further, both local and overseas experience suggests that it is very difficult for exchanges to attract trade in financial products away from other exchanges".
The ACCC noted both parties earn very high returns on capital, well above what is generally found in competitive markets.
Market inquiries raised some concerns about access to the ASX's clearing and settlement facility, CHESS, for clearing equities. However, given that the SFE's clearing and settlement system is unable to clear equities, it was apparent that the merger is not the cause of the concerns about access.
"For us to oppose the merger, we are required to substantiate a lessening of competition that results from the merger itself", Mr Samuel said. "Concerns about access to CHESS are more appropriately addressed in other ways".
Similarly, market inquiries raised some concerns about recent increases in ASX and SFE fees. These increases were unrelated to the merger and further illustrate the lack of competitive constraint between the ASX and SFE.
Market inquiries also raised some concerns that the merger will reduce product innovation. However, the ACCC concluded that product innovation is driven primarily by market participants devising products to meet client needs. These products are not necessarily traded on exchanges, nor is there any significant evidence of innovation being driven from competition between the ASX and SFE.
"The ACCC opposed a merger between ASX and SFE in 1999. At that time, it believed that the ASX and SFE were likely to compete in the future, particularly given proposed legislative changes that were expected to facilitate competition. However, there is no evidence that these changes, which commenced in 2002, have actually had this effect", Mr Samuel said.
The Australian Stock Exchange operates a national stock exchange for equities, derivatives and fixed interest securities. Sydney Futures Exchange provides futures and options on interest rates, equities, currencies and commodities.
The ACCC will issue a Public Competition Assessment on its website explaining in detail the reasons for its decision in relation to this matter shortly.