Tue, 09 Feb 2010

An ambitious initiative to allow cross-border trading between several south-east Asian stock exchanges took a significant step towards completion yesterday with a firm commitment to technology for the project.

Four leading exchanges said they had signed a letter of intent at a meeting in Manila with NYSE Technologies, the technology arm of NYSE Euronext, the transatlantic exchange that owns the New York Stock Exchange.

The four - Bursa Malaysia, the Philippine Stock Exchange, the Singapore Exchange and the Stock Exchange of Thailand - are in the vanguard of moves towards a common board that could eventually include stocks from most of the 10 countries in the Association of Southeast Asian Nations.

Vietnam's Hochiminh Stock Exchange and the Indonesia Stock Exchange in Jakarta are also backing the project , which could eventually lead to a single south-east Asian market for stocks with a combined capitalisation of more than $1,000bn.

Francisco Edralin Lim, chief executive of the Philippine Stock Exchange, said the deal with NYSE was a significant move towards the establishment of integrated Asean capital markets.

"We are confident that they will deliver cutting-edge solutions that meet all our requirements. We are also excited about the possibilities of leveraging their extensive order routing networks to bring order flow into the Asean markets," said Mr Lim.

The Thai stock exchange, which has been leading the integration project, said the trading link would allow investors to trade multiple Asean markets from their domicile countries while also allowing fresh access to order flows from outside Asean, which also includes Cambodia, Laos, Brunei and Burma.

The exchanges have been working with experts from the Asian Development Bank on technical issues such as the incompatibility of some existing trading systems, setting up central clearing and settlement arrangements and handling transactions in several currencies.

Yusli Mohamed Yusoff, chief executive of the Malaysian stock exchange, told the Financial Times in September that currency settlement for cross trades would follow "home settlement rules".

For example, the Malaysian ringgit would be used if trades were settled in Malaysia.

ADB officials say the Asean exchanges are individually too small to attract global attention, but could be globally competitive if they were to achieve greater scale and liquidity, potentially leading to the establishment of a new Asean asset class.

The cross-border trading initiative follows an agreement by Asean capital markets regulators on a "road map" for full integration of the region's capital markets by 2015.