Once again Australia is being severely damaged by a grandstanding politician, Wayne Swan’s xenophobic decision to block the proposed $8.4 billion merger between the stock exchanges of Australia and Singapore will damage damage Australian markets.

Should the Singapore Exchange bid fail the SGX and CEO Mr Bocker may win by default, while Wayne Swan and the FIRB may cry national interests, they can do nothing to stop many of the ASX companies heading to Singapore to list on a better exchange that has a real global presence.

Federal Treasurer Wayne Swan announced on Tuesday that subject to further consideration, he would accept advice from the Foreign Investment Review Board (FIRB) that the takeover would not be in the national interest.

Sensible observers are dismayed at the actions of the FIRB and Wayne Swan.

Computershare chief executive Stuart Crosby said that the long-term consequence of the FIRB’s assessment was that no-one would be prepared to engage with the Australian exchange in global consolidation conversations for a number of years.

“The fact that it became a matter of wedge politics rather than policy analysis will put everyone off,” Mr Crosby said in a luncheon address to the American Chamber of Commerce in Australia.

“The result will be that the vibrancy of Australian capital markets will be much more at risk than they would have been if the merger had been allowed to be considered on its merits.”

Mr Carson said he was “really deeply worried” that Australia could end up as marginalised as New Zealand.

He said that 10 years ago, New Zealand had about five per cent of the combined Australia/New Zealand equity market volume.

“Today it has less than one (per cent),” he said.

On October 25, Singapore Exchange offered ASX $8.35 billion in cash and stock to create the world’s fifth- biggest bourse. The deal, valued at $48 a share at the time of the announcement, was struck at the biggest ever premium for a securities exchange.

While Mr Bocker said he has other options if the deal for ASX falls apart, the decision may leave the Singapore bourse vulnerable as exchanges around the world turn to acquisitions to boost earnings.

The Singapore Stock Exchange is growing fast on many fronts, expansion through acquisition is just part of the plan.

The Singapore Stock Exchange is also attracting high profile IPO’s like Suzlon and Hutchinson Ports.

Now The Singapore Exchange (SGX) will expand their Securities Lending and Borrowing program to help boost liquidity and activity in the Singapore market.

Retail investors can currently lend their stock scrips to SGX for a return of four per cent per annum. The exchange will then allow other parties to borrow these stocks at an interest rate of six per cent per annum.

In an effort to boost market liquidity of less popular stocks on the exchange, SGX is looking to allow market forces to decide the scrip lending and borrowing rates for such counters.

The aim is to make them more attractive and competitive. This will be in line with more mature markets in the West, where such rates can range between 10 and 20 per cent.

The SGX said this will fill gaps not covered by banks currently, but has declined to give a timeframe on the rollout of its plans.

Savvy investors typically borrow stocks to cover short-selling positions in order to avoid settlement failures as part of their trading strategies.

Mr Tay Keng Kian, Vice President of Depository Services at SGX, said: “Really nothing is stopping us from doing that, in actual fact we do explore that as an alternative as to how we can actually grow the programme to support the market in terms of market activities. We are in the midst of looking at how we could do strategic lending as part of the programme as well. That’s up and coming, keep your eyes on this space and look at us for what’s going to happen in the future. But that’s definitely happening.

“We are not really competing as per se. It’s peculiar in singapore in that sense because most of the small caps and mid caps are held in individual investors’ hands. So in order to increase market activities in that kind of space, that’s where we want to come in and fill the gap and that’s where we really want to go.

“We are not competing against the agent lenders, the broker dealers because that’s not our mandate per se. Because they are better at doing what they do, and we just want to be part of the whole industry.”

In line with those plans, the SGX will be looking to build the pool of stocks it can lend. This will involve getting more retail investors to join its scheme to lend them stocks from their Central Depository accounts.

The Central Depository (CDP), which safe-keeps securities for retail investors and institutions, is the counterparty for all lenders and borrowers.

The SGX said possible ways of education could include more roadshows and seminars, and how it can work with brokerage firms.

Observers said the move will help bring the market in line with practices in mature markets like those in the West, but warn that it may take time for the local market to be ready.

Visiting Assoc Prof (Practice) Bernard Lee of SMU, said: “You’re potentially looking at a smaller company who you would be trying to increase the security lending liquidity on those names. And one of the potential issues is some of these companies may not necessarily be ready to deal with any kind of significant kind of price distortion…as with any type of shorting, there’s always a possibility of manipulation.

“The credit market looks at the stock market as to the credit worthiness of the company, so if the stock price driven down to close to zero on a unjustified basis, sometimes there are issues with lenders. One of the potential issues is like let’s just say when they first do this programme in Singapore there are a few extremely active shorters in the market, who are just targeting specific stocks, then you potentially create an issue.

“You have a situation where you have a people who potentially with the ability to sort of manipulate the stock from one side, because the market hasn’t grown used to it, you don’t necessarily have the other people jumping in and basically balancing it out.”

The SGX first rolled out its borrowing and lending programme in 2002, offering about 150 stocks. Last year, it expanded the pool to more than 600 stocks, which represent more than 80 per cent of the total listed counters on the exchange.