Sfe Rejects Brokers' Monopoly Claims
Sydney Morning Herald
Wednesday May 3, 2006
THE Sydney Futures Exchange has described as "opportunistic" concerns from institutional stockbrokers that its planned $5 billion friendly merger with the Australian Stock Exchange will create a pricing monopoly.
At what was possibly the SFE's last annual meeting yesterday, chairman Rick Holliday-Smith told shareholders the grievances were from a "small group of brokers" and he was "confident but cautious" the deal would succeed.The plan to create the world's ninth largest exchange still needs the approval of both the Australian Competition and Consumer Commission and the Federal Treasurer, Peter Costello.The Australian Financial Markets Association, which represents brokers, has asked the ACCC to intervene to ensure competition for trading services after talks with both the ASX and SFE broke down.But the SFE's chief executive, Robert Elston, yesterday described the concerns from brokers as opportunistic. "At the moment the two exchanges don't compete, so we are not understanding the argument that to allow them to merge would be anti-competitive," he said.Although the ACCC posed a "significant hurdle" to the deal succeeding, Mr Elston said the signs from the competition watchdog were encouraging.The ACCC has already reached a preliminary view that the proposal does not raise competition concerns and is expected to issue a final report on May 17.In 1999 the watchdog thwarted an attempted union by the ASX and SFE because of "significant concerns" a deal would "be likely to halt competition" and result in "a monopoly in exchange trading"."Seven years of history since the previous rejections suggests to us ... that if common sense prevails it should get past the ACCC," Mr Elston said. But AFMA's executive director, Duncan Fairweather, said yesterday that institutional brokers held "serious concerns" about the pricing monopoly created by a merger of the two exchanges. Brokers were already concerned about the pricing policies of both the ASX and the SFE as stand-alone businesses, he said."We have put a substantial submission to the ACCC, which highlights the pricing monopoly that will be created by the merger," he said.Mr Elston, who will not join the merged business, said he was still undecided about his next move after he steps down in July or August, although he was busy as a director for both the Future Fund and National Australia Bank. SFE shareholders are likely to vote on the deal next month. SFE fell 36c to $15.91 yesterday and shares in ASX fell 80c to $31.81.
© 2006 Sydney Morning Herald