30 May 2006
The merger of the Australian Stock Exchange (ASX) and Sydney Futures Exchange (SFE) will promote financial stability by coordinating the market activities of two closely-connected spot and futures markets, a Monash University academic has said.
Professor Mohammed Ariff, from Monash's Department of Accounting and Finance, said the Australian Competition and Consumer Commission's decision on 24 May to clear the merger was correct as there was much to be gained.
"The merger is not likely to lessen competition in the securities exchange sector because there is no conflitc of interest between the two exchanges," Professor Ariff said
"The trades of the two exchanges are closely linked - one could not take place without the other. The ASX deals with present day pricing of securities and SFE trades in future securities. However, we are seeing the markets coming together increasingly to facilitate hedging. The merger will mean customers will be able to go to one exchange for all transactions, and have sources of information from one body.
"Overthe past 35 years we have seen ASX and SFE come into conflict on few occasions. The merger of the two exchanges will promote more orderly development of the market, through one single authority, the Australian Securities Investment Council," Professor Ariff said.
He said it made sense for Australia to have a single securities exchange.
"There are cases in other countries where spot and futures have been successfully merged into one," he said.
"Australia's market structure is very simple, it has just one stock exchange and one futures exchange. This was the structure in Singapore until 1999 when it merged its exchanges. This merger has been hugely successful and there has been no conflict of interest."
Professor Ariff said it was unlikely that the US and India would establish a single securities market since these two countries had many independent stock exchanges and different futures contracts traded in the stock exchanges.
"In the US, there is also the very well-established dual system of supervision by the SEC and futures exchange regulators.
"The establishment of a single securities exchange is a positive step forward and will promote a stronger Australian exchange market. Australian investors and financial institutions will receive consistent information and trading costs -- the benefits of dealing with a single body," he said.
For more information contact Ms Natasha Whalley, Media Communications on +61 3 9905 9201 or 0437 458 457 or Ms Jacqui Golding, Faculty of Business and Economics, on +61 3 9903 2265.
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