An Australian Stock Exchange (ASX) spokesperson said the exchanges were each preparing to raise the number of stocks made available to investors in the other's country via the link, from about 50 to 100 within the next six months.
The spokesperson said the same criteria that determine the stocks presently made available via the link--market capitalisation, liquidity and relative performance as an index component--would be applied when selecting the next 50.
The move comes despite indications that plans to forge similar electronic cross-border linkages with other exchanges in the Asia-Pacific and beyond are unlikely to proceed until the global business and political climate improves.
One source told ZDNet Australia that "the current environment is not conducive to cross-border trading," with the forging of electronic cross-border links "not the first thing on exchange's minds, let alone investors'".
Investors have suffered heavily over the last couple of years due to the tech wreck, corporate governance debacles and global economic decline, with confidence well below levels required for enthusiastic participation in fledgling ventures such as cross-border trading. The prospect of war in Iraq and the confrontation with North Korea is unlikely to help rebuild that confidence. Exchanges, whose businesses have been hit hard by those factors, are also pushing low-revenue generating innovations well down their list of priorities.
The electronic co-trading link, launched just over a year ago, is designed to make it just as easy for Singaporean investors to trade ASX-listed stocks as it is for Australian investors and vice versa. Both exchanges are anxious to play down the trading volumes generated via the link in its early months of operation, focusing instead on the innovative technological and regulatory aspects of the business model. The ASX spokesperson declined to comment on trading volumes, but noted the Australian bourse had committed to a three-to-five year lead time in building a profitable business via the link.
Singapore in particular is anxious to promote the model as the basis of future agreements with other exchanges in the medium to longer term. In an e-mailed response to questions supplied by ZDNet Australia, the Singapore Stock Exchange (SGX) said "we hope that the ground-breaking regulatory cooperation achieved in the SGX-ASX link will set [a precedent] for regulatory talks in other countries around the region to eventually lead to possible development of a pan-Asian marketplace". Underlying Singapore's push is the fact that Asia is significantly underweight in global capital investment terms relative to the United States and Europe, hampering the SGX' attempts to grow its business.
Both exchanges rate the technology-based cross-border model as their preferred alternative to merging with other bourses as a way of gaining scale. The ASX failed in a merger attempt with the New Zealand Stock Exchange and since then has moved to work on a model that accommodates sovereignty issues.
Both exchanges are quick to praise the support of their regulators for agreeing to processes acceptable to the other in resolving potentially thorny issues that could arise when, say, a Singaporean investor who trades ASX-listed shares via the link registers a formal complaint against the practices of an Australian company.
However, sources concede that this is easily the most difficult element of the model to replicate in forging like agreements with other exchanges. "The dialogue is there, but the issues involved in negotiating similar links with other exchanges are extremely complex," one source said. "Some have only just demutualised [ shifted from a member-owned organisation to a limited liability company] while some maintain a degree of government control or intervention.
"In some countries, giving up a degree of sovereign control is unthinkable as yet".
