Australian Stock Exchange Ltd (ASX)—proposed acquisition of Sydney Futures Exchange Ltd (SFE)
On 24 May 2006 the ACCC decided not to oppose the merger between the Australian Stock Exchange and the Sydney Futures Exchange.
The ACCC considered that the proposed acquisition would be 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.
From the evidence provided, the ACCC concluded that the current lack of competition between the ASX and SFE was unlikely to change in the foreseeable future. It also noted that 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 found that 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.
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 began in 2002, actually had this effect.
The ASX operates a national stock exchange for equities, derivatives and fixed interest securities. SFE provides futures and options on interest rates, equities, currencies and commodities.
On 4 May 2006 an undertaking was provided by Toll Holdings Ltd that varies the undertaking given by it and that was accepted by the ACCC on 11 March 2006.
