Singapore/Sydney; London/Toronto; Frankfurt/New York; even BATS and Chi-X Europe, two of the upstart rivals to these ancient exchange groups, are looking to do a deal. But from the world’s biggest bourse by market capitalisation – Hong Kong’s – there has so far been barely a peep.
The day after Deutsche Börse and NYSE-Euronext revealed their merger plan, in fact, shares in Hong Kong Exchanges & Clearing dropped 5 per cent – their biggest one-day fall in almost two years. It should be no surprise to anyone if the 11 year-old exchange group sits out this round of industry consolidation, as it has all the others. For one thing, HKex suffers few of the competitive pressures that peers are suffering. Its de facto monopoly on stocks, futures and clearing – enshrined in article 19 of Hong Kong’s securities and futures ordinance – seems likely to survive the city’s new competition bill, due to be enacted next July.
Any deal, therefore, would amount to a voluntary dilution of returns. HKex’s practically unchallenged profits in cash trading and clearing – about two-thirds of its revenues – led to an 81 per cent operating margin in the latest quarter, almost five times higher than NYSE-Euronext’s.