There are quite a few reasons why the Singapore takeover offer for the ASX should be approved, with suitable caveats.

Because of time differences, but especially the early deadlines in Australia, local business writers were not able to pick up the 6.1% fall in the price of the Singapore Stock Exchange share price yesterday in Singapore.

The deal raises all sorts of questions, some already tackled, especially by writers in the Fairfax broadsheets and the Australian Financial Review, and in a couple of instances The Australian.

The Singapore fall was strange given the way the market there is dominated by the MAS, which is the most powerful authority in the island state (apart from the Lee family). The MAS controls 23% of the Singapore Exchange and is the biggest shareholder.

It is a paranoid central bank, nowhere near as open as the Reserve Bank of Australia. In 1994, it obtained convictions under the country’s Official Secrets Act over the 1992 leaking of growth figures before their release:

The Singapore saga began on June 29, 1992, when the Business Times did something no Singapore newspaper had ever dared before: It published the official “flash estimates” of second quarter economic growth before the government released them. A few weeks later, seven investigators from the Internal Security Department walked into the office of Patrick Daniel, editor of the Business Times. And in Shenton Way and Raffles Place, the financial community realised that leaks would not be tolerated, even if it meant a costly trial of, in the attorney-general’s words, “five distinguished gentlemen”.

The defendants were Daniel; Business Times economics correspondent Kenneth James; economists Manu Bhaskaran of Crosby Securities Pte. Ltd. and Raymond Foo of Crosby Research Sdn. Bhd.; and the respected director of the Monetary Authority of Singapore’s economics department, Tharman Shanmugaratnam. The government could not prove that Shanmugaratnam actually communicated the confidential data to Bhaskaran at a meeting, but he was found guilty of “negligence,” or as a local wag put it, “keeping his desk untidy.” Bhaskaran, who took the naughty peek, and Foo, who got the information from his colleague, were found guilty of receiving the information and passing it on to James, who sent an electronic mail message to Daniel. In its defense, the newspaper said it decided to run the story after a senior government official told a correspondent that the corporate sector’s “rah rah feeling” needed to be curbed.

The trial showed that none of the accused had profited from inside information and that publication did not move the stock market in any way. The five men were let off with fines after Attorney General Chan Sek Keong — who took the unusual step of prosecuting the case himself — surprised the court by saying: “I would not go so far as to say that a custodial sentence would be the correct sentence.

That put Singapore on a par with China, which in 1994 jailed a Hong Kong newspaper reporter for 12 years after a secret trial for allegedly “stealing state secrets” on gold sales and interest rates.

The same article finished with this remark: “Senior Minister Lee Kuan Yew offers further advice. He has warned private sector economists not to act as ‘pressure groups’ to influence government policy.”

This is a problem the federal government will have to sort out before approval is given; the extraterritoriality of Singapore laws in Australia, not securities laws, but the Official Secrets Act because all ASX employees will be employees of the SGX and presumably subject to Singapore law.

Perhaps the major issue (and again raised by the Sydney Morning Herald) is where capital for the Australian exchange’s clearing house will be held. The paper quoted a Sydney broker as saying ”One of the key issues will be where is the clearing entity capital maintained… In other words in the event of a default on the ASX will participants have capital reserves to call upon.”

The Reserve Bank would ”want that to remain in Australia”, the broker said. And yes it would. That was not mentioned yesterday, and could very well see the whole deal fall over.

The capital for the clearing house has to remain in Australia and not be pooled with that for the smaller Singapore Exchange.

And there is one last question: given the MAS controls 23% of the Singapore Exchange, what would have been the reaction if the ASX (which is larger in terms of every metric, except price earnings ratio and market value) had bowled into Singapore and launched talks aimed at a takeover, which is what the SGX did?

The MAS would have objected because it would have meant its control over the Singapore Exchange and part of the country’s financial system would pass to Australia. So why are we thinking it should be any different here?