Singapore Exchange Said to Mull Tie-Ups as Deals Grow Harder

  • Talks said to range from partnerships, stake sales to merger
  • SGX said to have held preliminary discussions with Nasdaq, CME

Even as regulators crack down on yet another round of consolidation among exchange operators, at least one major bourse is still keen to pursue deals.

Singapore Exchange Ltd., which runs Southeast Asia’s largest stock and derivatives market, has in recent months held exploratory talks about possible tie-ups with overseas exchange operators, people familiar with the matter said.

Discussions with parties including Nasdaq Inc. and CME Group Inc. have ranged from potential collaborations to the sale of a stake in the company or even a full merger, the people said, asking not to be identified as the details aren’t public.

SGX, with a market value of about $6 billion, has been weighing its options as rivals attempt to consolidate across the industry. An outright sale would be complicated as cross-border deals between exchange operators attract intense scrutiny from regulators, the people said. European Union regulators on Wednesday blocked Deutsche Boerse AG’s $14 billion takeover of London Stock Exchange Group Plc, adding to a long history of failed merger attempts between bourses.

SGX has not hired any advisers and no formal decisions have been made about how to proceed, the people said. It’s unclear if any talks are currently active.

Representatives for CME, Nasdaq and SGX declined to comment. Shares of SGX closed down 0.1 percent on Thursday. Nasdaq rose 1.2 percent while CME was little changed in New York trading.

Regulatory Scrutiny

Nasdaq, an exchange operator valued at $11.5 billion, is the third-largest stock exchange operator by volume in the $26 trillion U.S. stock market. CME, with a market valuation of $40 billion, owns the world’s largest futures market, offering trading in derivatives based on interest rates, government bonds, currencies, stock indexes and commodities. It grew to its current size through acquisitions, agreeing to buy both the Chicago Board of Trade in 2006 and the New York Mercantile Exchange in 2008.

It’s been a decade since the last international deals to combine bourses were waved through by regulators. Nasdaq was allowed to buy Nordic exchange operator OMX AB in 2007, while NYSE Group Inc. announced plans to acquire Euronext NV for $14.3 billion that same year, creating the first trans-Atlantic stock exchange.

Other deals weren’t so straightforward, with many attempted acquisitions getting blocked or failing. Before its latest attempt, Deutsche Boerse made two other losing gambits to buy LSE, in 2000 and 2005. Macquarie Group Ltd. had its attempt to bid for LSE rejected the following year, while Nasdaq’s offer for the London exchange was rebuffed in 2007.

Deutsche Boerse again lost out when EU regulators in 2012 vetoed its attempt to buy NYSE Euronext, after the U.S. Justice Department blocked a joint hostile bid by Intercontinental Exchange Inc. and Nasdaq to buy the NYSE.

Domestic deals have been easier to pull off: U.S. regulators let Intercontinental Exchange Inc., based in Atlanta, buy NYSE Euronext for $10.3 billion in 2013, and Chicago’s CBOE Holdings Inc. recently closed its acquisition of Lenexa, Kansas-based Bats Global Markets Inc.

Market Benefit

Adena Friedman, Nasdaq’s new chief executive officer, said on a panel discussion at the Futures Industry Association annual conference this month that although cross-border exchange mergers come with additional scrutiny, they can ultimately benefit markets.

“When they do work, I think they can work really well,” Friedman said.

Speaking on the same panel, Terrence Duffy, CEO of CME, said exchanges often become a symbol of nationalism.

“These are institutions that countries believe are part of their DNA,” Duffy said. “They don’t want to see them leave. So they’re going to make the hurdle higher and higher.”

Asia Footing

Partnering with or acquiring a stake in SGX would give a U.S. or European exchange a stronger footing in Asia as the fight for global capital escalates. The company, based in Singapore with offices in mainland China, Hong Kong, India, London and Japan, reported net income of S$349 million ($250 million) in 2016, little changed from a year earlier, on total revenue of S$818 million.

The average daily value of shares traded on SGX this year was about $847 million, up 11 percent from $763 million in 2016, according to data compiled by Bloomberg. Still, that’s down from $1.12 billion a day in 2013.

The Singapore bourse already has an existing relationship with New York-based Nasdaq. The U.S. company sells technology to market operators in 50 countries, and SGX is one of its customers, according to regulatory filings.

In 2011, SGX’s A$8.35 billion ($6.4 billion) bid for Sydney-based ASX Ltd. was scuttled by Australia’s government. The deal would have created the world’s fifth-largest bourse operator at that time.

— With assistance by Dinesh Nair, Manuel Baigorri, and Joyce Koh

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