Vision 2015, the ambitious agenda to unite the economies of ASEAN,1 could create enormous wealth for enterprises, investors, and, ultimately, the people of Southeast Asia. But the obstacles are considerable, not least for the region’s financial exchanges.
Against all odds and predictions, leading players in Europe and the United States have created an elite class of rapidly growing global exchanges forged through cross-border mergers, acquisitions, and alliances. For the first time, mergers of exchanges across national boundaries are becoming a reality, leading to ever-greater economies of scale. In contrast, the independent exchanges of Southeast Asia, with their lower liquidity and subscale trading and clearing facilities, face a serious risk of being left behind.
Adding to the pressure, a number of alternative trading venues, such as Project Turquoise (in Europe) and the Boston Equities Exchange (in the United States) have recently been formed by brokers attempting to “remutualize” trading and thereby compel existing exchanges to hold down their pricing and improve market access. New regulations in Europe and the United States are helping these alternative platforms compete, so incumbent exchanges will have to respond by adapting.
In the short term, thanks to favorable domestic regulations and the natural pooling effect...