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1 January, 2011The Australian, December 2010
If Magnus Bocker has appeared sanguine about the sometimes vicious reception to his proposed merger of Singapore Exchange and the ASX, that’s because he’s seen it before. This is, by his count, his 10th potential exchange merger, and none of them have been easy.
“There are normally four groups you need to work with: clients, shareholders, regulatory and political,” says Singapore Exchange’s Swedish CEO. “And in my experience on exchange mergers, I’ve had the pleasure of having issues with all of them. I don’t know which is the toughest. But you very rarely find an integration that takes everybody on board straight away.”
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What’s remarkable about Bocker’s story is that his sequence of mergers only began in 2003, when he was deputy CEO of a market technology provider called OM Technology, which operated the Swedish stock exchange. That year, OM merged with HEX Integrated Markets, which ran the exchanges of Finland, Estonia and Latvia.
Rising quickly to CEO, he then orchestrated mergers with exchanges in Lithuania, Denmark, Iceland and a stake in Norway, before triggering a bidding competition for this entire Nordic-Baltic bloc between Nasdaq and Borse Dubai (Nasdaq won). Nasdaq OMX was formed in February 2008 – by which time he’d overseen another merger in Armenia – and Bocker, just five years on from being a tech company deputy in Stockholm, was president of the world’s largest exchange company.
Asked what he learned along the way that he can apply now, his answers are characteristically logistical and practical rather than political: he is an operations man and his comments are peppered with references to efficiency and service rather than the landmark vision one might expect.
“When you talk about a merger you talk about cultures coming together, learning to work and live together,” he says. “One experience I’ve had is that sometimes there is more in common between stock exchanges regardless of borders.” Stockholm and Helsinki’s stock exchanges had more in common than Sweden’s own options and stock exchanges did, he says. “In our little world of exchange mergers, the challenges are sometimes local. It can be easier to get two together cross-border than in the same country.”
The other lesson he highlights is that “money has started to go cross-border much faster than we as exchanges have helped it to do so.” That’s not true of other financial service providers, he says: if you want a Japanese mutual fund in Australia you don’t expect to go to Japan to get it, you go to an Australian provider. “Exchanges have been a little bit behind on that. We come from an environment where we are not used to helping our clients facilitate their business.”
Both comments are revealing, because they speak very much to Bocker’s vision of exchanges as service providers, unromantic pieces of market infrastructure rather than staid national icons. But after the political mauling his ASX bid has received in Australia, one would have expected him to raise that as a lesson mastered elsewhere. Asked if the political storm here has been worse than in other mergers, he responds: “Absolutely not.” He does, though, see the point. “In all exchange mergers there is that nationalistic sadness but comes up. But it’s not like Paris Bourse disappeared just because Euronext [which combines the Paris, Brussels and Luxembourg exchanges] got together with NYSE. And it’s not like the ASX will disappear just because it continues to develop. But it takes a while before we get accustomed to the thought.”
Moreover, he thinks some of the worries politicians have highlighted are not only valid but essential. “It is very important that the question of national interest is raised,” he says. “Exchanges need to add value to countries. If we cannot deliver more national interest by this combination then we shouldn’t do it. Politicians who don’t ask that question are not understanding what we as operating exchanges are really here for.” He has less time for questions that belittle Singapore itself, insisting that the standards of governance, independence, transparency and shareholder feedback are at least as strong in Singapore as anywhere else, without state interference.
None of it has shaken his conviction that mergers are the right thing to do. There was a much clearer rationale in his early mergers in Nordic and Baltic countries, though: Europe at that time was amid sweeping regulatory change, and it was obvious to all that 40-odd exchanges could not survive independently in what was increasingly a single bloc of capital. “It was a natural driver to say: we need to reduce the number of exchanges, to simplify the network,” he says. It was a simple as, for example, thinking that Finland’s Nokia and Sweden’s Ericsson, or the pulp and paper companies of both countries, would represent a powerful sector in combination. “There was a vision that in order for us to be more competitive in the European landscape, the Nordic exchanges [in combination] were big and strong enough to play a significant role in Europe.” But in his view it’s always flows of money that drive consolidation. “If there is an opportunity for cross-border mergers it never starts with the exchanges, it starts with the underlying capital markets.”
The Nasdaq merger was of a different order again and was more opportunistic, a symptom of its time. “When we started the journey with the Nordics, that [Nasdaq] was not part of the plan. It was not even conceived as an opportunity.” But it wasn’t the first such deal Bocker was involved in. When Macquarie Bank bid for the London Stock Exchange in 2005, it did so with OMX in the background. Bocker, who is a big admirer of Macquarie and its people, denies he was in line to be the CEO – “We never discussed it, I find it unlikely that I would” – but his impressions of Macquarie and its bid are instructive about how he sees exchanges. “The team at Macquarie really saw what the exchange business is all about,” he says. “At that time it made a lot of investments into airports, bridges, toll roads. And exchanges, to some extent, are not too far away from that: a lot of stable recurring revenues. It was very logical, and we saw we could do something together, fronted by Macquarie.”
“Logical” is a very Bocker word, fitting into this rationale for creating progressively bigger liquidity pools around the world to meet a changing market. It fits, for example, his interesting decision to partner with the dark pool liquidity provider Chi-X just a few months after taking on the Singapore Exchange top job. Exchanges generally are worried about dark pool providers and wondering how to deal with them; to Bocker, it therefore made sense to partner with them instead of fight them. “Over time as the market develops there will be different ways to cross a trade,” he says. “The way we traditionally do it, in exchanges, is one way but we shouldn’t get stuck on one model. We ought to embrace new models when technology makes it possible.” He accepts that Chi-East, the tie-up with Chi-X, “might have some short term issues for us as Singapore Exchange, but long term if it’s good for our clients that will benefit our business.”
What was less logical, though, was taking the Singapore job in the first place. Bocker’s president title at Nasdaq OMX was not ceremonial: he was responsible for listings, corporate services and, surely his favourite subject, market technology. His wife and three children, two of them then at high school age, were settled. His life and work, as he puts it, were “in harmony”. Why move? Bocker says he was initially polite but not keen, but eventually decided to do his own due diligence on Asia, Singapore and Singapore Exchange itself. Swiftly he liked what he saw: the Asian time zone as an engine of world market growth and fund flow; Singapore as a senior financial centre within it, with the necessary regulatory stability, market strength and “willingness to change and improve”; and the exchange, “a more open and embracing company than I thought.”
The challenge has been different. “What we did in the Nordics and OMX Nasdaq was a competitive situation where we needed to bulk up and start saving costs and work differently. At Singapore Exchange it’s a question of how do we grow faster, how do we bring on all those products we don’t have today.” But clearly the prospect of European-style change in Asia must have been attractive to this consummate dealmaker: the sense of a shifting landscape. “There will be new opportunities, new combinations we never thought of before. I’m not sure SGX and ASX was a logical combination five years ago, maybe even a year ago. But suddenly this year it turned out to be a good combination.”
It’s perhaps not surprising to find that a 10-merger man is also a 3 hour 53 minute New York marathon runner; nor to find that he claims a certain social zeal in what he does. “There has never been starvation in a country with a well-functioning stock exchange since 1921,” he says. “We add value to society. That makes it easier for me to enjoy every day, to spend the time and drive it.”
And whether or not the ASX deal gets over the line, there’s no doubt there will be other deals. It’s inevitable. “I like old sports cars, but I’m driving a new Lexus hybrid, because the market has developed,” he says. “For stock exchanges, it’s the same thing.”
