Asean trading link goes live in September

Wednesday, Aug. 29 2012
JEREMY GRANT
SINGAPORE — Financial Times

A share-trading system linking key markets in the Association of Southeast Asian Nations (Asean) is expected to go live next month after regulators approved the launch of a first stage of the project linking the Singapore and Malaysian bourses.

The project, known as the “Asean Trading Link,” is part of a vision by Asean policy makers to unite the capital markets of the 10-member bloc, which has an economy bigger than India’s.

Asean’s capital markets regulators have agreed on a “road map” for integration of the region’s capital markets by 2015. This would ultimately allow the creation of Asean “as an investable asset class,” according to the Singapore Exchange, one of the link’s main backers.

One person familiar with the project said the link, which was originally set to involve a handful of the biggest Asean exchanges, would start with the Singapore and Malaysian bourses after both countries’ regulators granted approval. Thailand will follow shortly afterward, while exchanges in the Philippines, Indonesia and Vietnam would join later.

The project has involved building an electronic “order routing” system that will enable brokers in Malaysia and Singapore to more easily connect their clients to trading on each other’s exchanges.

It will electronically connect the exchanges to facilitate cross-border order routing and trading, and eventually allow investors and members to trade in multiple Asean markets from their own country or from outside southeast Asia.

“We’ve got the green light. It’s going to be in the next couple of weeks,” the person said. Neither SGX, the Singapore Exchange, nor Bursa Malaysia were available for comment.

Currently an investor in Malaysia wanting to trade shares in Singapore would typically have to telephone a local broker, who would contact a broker in Singapore – each time incurring fees.

The system bypasses that and should lower the barriers to entry for investors, sourcing more cross-border trading, experts say.

The Singapore Exchange and Bursa Malaysia have paid for most of the system, which has been built by Sungard, a U.S.-based trading technology company, although brokers will be charged a fee for using it.

The concept of the Asean link is similar to a three-way link launched last year in South America by bourses in Chile, Peru and Colombia.

Known as “Mila,” it also involves order routing and was set up as a way of boosting liquidity in such markets as a counterweight to the growth of Brazil’s exchange, which accounts for 80 per cent of company market capitalization in the region.