SGX and ASX agree to terminate merger after Wayne Swan blocks move

"In these circumstances, the parties have agreed to mutually terminate the merger implementation agreement entered into on 25 October 2010," Singapore Exchange said.

SGX said that it believed Asia would remain the world's growth engine in the coming decades.

"SGX, as the Asian gateway, is well-positioned to leverage on opportunities within Asia's vibrant and dynamic economies,” SGX said.

"As Asia's most international exchange, we will continue to pursue organic as well as other strategic growth opportunities, including further dialogue with ASX on other forms of co-operation."

An ASX statement said: "ASX will continue to evaluate strategic growth opportunities, including further dialogue with SGX on other forms of combination and co-operation."

The ASX is seeking a new CEO due to the planned retirement of incumbent Robert Elstone.

Earlier today, Treasurer Wayne Swan the deal offered little for Australia and raised the risk of the country losing control of its clearing and settlement systems.

Mr Swan has risked damaging the country's appeal to foreign investors with the comprehensive rejection, which deals a major blow to the ASX's hopes of finding a partner against a back drop of consolidation amongst exchanges globally.

"It became clear to me that it's a no-brainer that this deal is not in Australia's national interest," Mr Swan told reporters.

The SGX deal is only the second takeover to be rejected by Australia in the past decade, the last coming in 2001 when Royal Dutch Shell was prevented from buying Woodside Petroleum.

Mr Swan brushed off concerns over protectionism or political interference in his decision and said the unanimous advice from the Foreign Investment review Board, or FIRB, was the major factor in influencing his decision based on the grounds that Australia would lose sovereignty over its clearing systems and compromise Sydney's goal to become a regional financial hub.

Mr Swan argued that because the ASX clears and settles all trades in the country, it plays a key role in guaranteeing the market's integrity. Regulators will review how to strengthen the regulatory framework of clearing systems for stock trades, derivatives and other securities, said Mr Swan.

The Treasurer also pushed back on views the merged entity would offer Australian corporates greater access to Asia capital flows and described other benefits of the deal as "overstated."

He noted Australia is the world's 11th largest exchange by market value compared with Singapore, which is listed at 21.

"There's no clear evidence this deal would enhance the operations of our exchange," said Swan. "The deal doesn't stack up, whatever yardstick you use. This is not a merger, it's a takeover that would see Australia's financial sector become a subsidiary to a competitor in Asia."

The swift regulatory response on the ASX-SGX bid, when FIRB advised SGX earlier this week of major obstacles to the deal, came within the statutory 30-day consultation period, raising concerns over political interference, something Mr Swan categorically rejected today.

To be sure, Australia isn't alone in blocking deals. Last year Canadian regulators blocked mining giant BHP Billiton's attempted takeover of Potash Corp of Saskatchewan, while the proposed merger of TMX Group and London Stock Exchange Group also has its critics in Canada.

By promising to beef up the existing regulatory structure Mr Swan offered the ASX an olive branch for possible future mergers, though ownership stakes bigger than 15 per cent will continue to require parliamentary approval.

Illustrating the depth of political opposition, Greens leader Bob Brown, a vociferous opponent of the merger, welcomed the veto. "This is the right decision," he said.