Australian Treasurer Wayne Swan officially rejected a proposed merger of the Australian and Singapore stock exchanges Friday, branding it a takeover by the city-state that offered no benefits.
"Let's be clear here: this is not a merger. It's a takeover that would see Australia's financial sector become a subsidiary to a competitor in Asia," he said.
"It was a no-brainer that this deal is not in Australia's national interest."
Swan said Australia's "economic and regulatory sovereignty over the ASX would be at risk" if the deal went through, making the country's bourse a junior partner.
"Given the size and nature of the SGX, the opportunities that were offered under the proposal were clearly not sufficient to justify this loss of sovereignty," he said.
The ASX and SGX announced plans last October to create one of the world's largest and most diversified financial trading hubs in a Aus$8.4 billion ($8.7 billion) deal.
But the proposal immediately hit hurdles in Australia, where concerns over foreign ownership and Singapore's democracy and rights record were raised.
Despite Swan's decision, the ASX remained convinced it should be part of regional and global exchange consolidation.
"ASX will continue to evaluate strategic growth opportunities, including further dialogue with SGX on other forms of combination and cooperation," the company said.
The Singapore bourse said it would look for other opportunities.
"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," it said.
Swan's veto was the first time since 2001 that an application has been rejected by the Foreign Investment Review Board and the Treasurer was at pains to make clear that Australia still welcomed foreign investment.
"The Australian government?s longstanding policy is to welcome foreign investment," he said.
"Such investments are subject to review on a case-by-case basis ... which allows the Treasurer to prohibit a particular acquisition on national interest grounds.
"It is important to emphasise that this occurs very rarely."
Nevertheless, Australia's attitude could see the ASX fall behind its peers, analysts say, amid the climate of stock exchange consolidation.
Last week, the Nasdaq and Intercontinental Exchange joined forces to make an $11.3 billion bid for NYSE Euronext, while the London Stock Exchange has proposed merging with the Toronto bourse.
Matt Robinson, a senior economist at Moody's, said the decision "generates a potentially toxic degree of sovereign uncertainty regarding future merger and acquisition activity involving Australian companies".
"Using Treasurer Swan?s rather eloquent wording, the only 'no-brainer' in this instance is the damage done to Australia's reputation as a destination for foreign capital."
Swan said the Treasury, the Reserve Bank of Australia, and the Australian Securities and Investments Commission were all concerned about regulatory oversight when it came to SGX's bid.
"It is important that we continue to build Australia's standing as a global financial services centre in Asia to take best advantage of the benefits of our superannuation savings system," he said.
"I had strong concerns that the proposed acquisition would be contrary to these objectives."
In coming to a decision, he considered the proposal?s potential benefits and implications for Australian businesses, investors and the community, and decided they were not enough to green-light the deal.
"At the end of the day this takeover was more about growing Singapore's financial sector than Australia's," he said.
"The deal just doesn't stack up whatever yardstick you use."