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Four Southeast Asian Exchanges Plan Trading Link To Boost Volumes
In the Spotlight | 11 February 2011

Four Southeast Asian bourses announced Wednesday (2 February) they plan to develop a trading link that is expected to go live by the end of 2011 as the region’s exchanges seek to boost trading volumes and allow investors greater access to other markets in the region.

The exchanges operated by Singapore Exchange Ltd, Bursa Malaysia Bhd, the Philippine Stock Exchange Inc and the Stock Exchange of Thailand will develop the Asean Trading Link, which takes it name from the Association of Southeast Asian Nations. It aims to electronically interconnect the participating markets and enable investors to buy or sell shares in any of them, settling the transactions in their home market.

Some of the technology will be provided by NYSE Euronext, which operates exchanges that cross borders in the U.S. and Europe. The exchanges said they have invited tenders to build the link.

The system is a step toward the way trading works in the West, where hedge funds and other big traders have the ability to jump from market to market looking for the best opportunities and best prices.

But some analysts believe it may not necessarily work in Asia, where the relative size of the exchanges differs.

“The smaller exchanges may well lose customers to the dominant exchange, in this case Singapore. Malaysia and Singapore had such an arrangement many years ago and it failed. Even on the Asean link, they have been talking for the past several years but not made much progress,” said an analyst with an international bank, who declined to be named due to company policy.

The Indonesia Stock Exchange, which was a part of the proposed Asean Link earlier, was absent from the announcement today and no information was given on whether the nation had pulled out of the pact.

Still, the move shows how competition is revving up as the region’s markets look for incentives to draw traders and company listings. A similar dynamic is pushing the Singapore Exchange’s bid to acquire Australia’s ASX Ltd and slowly growing regulatory acceptance of alternative trading areas like dark pools.

SGX Aims Big

Singapore Exchange has perhaps been the most proactive bourse in the region in the last year since Chief Executive Magnus Bocker took office in its attempts to develop the bourse into a leading global platform.

In October, Singapore Exchange announced an US$8.3 billion offer for all the shares of ASX, the operator of the Australian Securities Exchange, in a deal that would create the world’s fifth largest listed exchange operator.

Market observers say the merged entity would have access to a combined US$1.9 trillion market which could pose a threat to major Asian exchanges in Hong Kong and Tokyo by luring away big fee-paying clients like high-frequency traders and companies seeking to raise capital in deep and liquid markets.

Singapore Exchange said last month it will launch the world’s fastest trading engine, ‘SGX Reach’, on 15 August to enhance the island nation’s position as a trading hub and help global investors participate in the growth of economies in Asia.

It also announced that it would eliminate its 90-minute lunch period from 1 March to give investors a bigger trading window.

In October last year, a joint venture between Singapore Exchange and Chi-X Global Inc received approval from the Monetary Authority of Singapore to become a recognized market operator for an Asia-Pacific alternative trading platform, or dark pool – an electronic trading venue where money managers trade large blocks of shares anonymously.

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