The New Zealand Stock Exchange is believed to be holding merger talks with exchanges in Singapore and Canada as well as Australia.
The decision to investigate alliance opportunities is understood to have followed a report by Boston Consulting on options for the New Zealand exchange.
Helping fuel speculation about theexchange's intentions was the recent visit to New Zealand of the chairman of the Australian Stock Exchange.
There are also suggestions that a much wider game is being played. Just last week, the Frankfurt and London stock exchanges announced they will merge and other European exchanges say they are considering similar action.
Reports on Bloomberg suggest the Australian exchange is seeking government approval to raise its ownership restrictions so it can seek international alliances. It apparently approached the London exchange prior to its merger announcement.
On the home front, the issue about the relevance of the New Zealand market is continually debated. Highlighting this was an announcement earlier this month of migration to Australia of one of New Zealand's largest corporates, Lion Nathan.
The chairman of the NZSE, Eion Edgar, is keeping his cards close to his chest. He declined to confirm who the exchange was talking to other than there were three parties, one of which was Australia.
Any deal was months away, he said. "I would like to think we will be well advanced by the end of the year."
Mr Edgar stressed that the stock exchange board could only make recommendations.
"At the end of the day the members will decide if it is right or wrong. It will only work if we can show it can add value."
Mr Edgar said there was an enormous number of issues to work through before anything could be done, particularly in areas such as takeover legislation and corporate law.
The exchange would act only with the support of government, he said.
New Zealand was a low-cost operation - around that of Australia, Mr Edgar said..
So any deal would have to have compensating benefits. "You would only do this if you can add value.
"If you can increase the capital formation and the liquidity of the New Zealand market then it makes sense."
News that the NZSE is talking to other exchanges has caught a number of its members off guard. While talk of merging with another exchange has been an ongoing issue over the past four or five years, only a select few were aware that formal talks had commenced.
As of June 1999, the exchange had 273 members across 40 broking houses.
