11.16.2011
By Terry Flanagan

ASX Hits Back

With competition coming to the exchange landscape in Australia, the incumbent Australian Securities Exchange is fighting back against its new rival.

Weeks after Chi-X Australia entered the Oceania nation’s market, the ASX has countered with the launch of PureMatch, a new trading system aimed at high-frequency traders.

“PureMatch was developed in response to the new equity market rules,” Richard Murphy, ASX General Manager Equity Markets told Markets Media in emailed response to questions. “ASX recognised the changing market dynamics and the opening up of equity markets to multiple market operators would likely result in a growth in high frequency trading. PureMatch is aimed at high frequency traders. It is a way of ASX providing differentiated products and services rather than having a one-product-suits-all approach. PureMatch is a key part of our cash equity trading strategy going forward.”

PureMatch is expected to go live Nov. 28.

The ASX has noted to regulators that it has not experienced any negative effects from high-frequency trading. In a submission to regulatory authority Australian Securities and Investments Commission earlier this year, the exchange said, “high-frequency trading activity that has been observed in Australia to date appears to have been a net positive for price formation in the Australian market (helping to lower bid-offer spreads) and has not raised systemic market integrity issues. ASX does not see the need, at present, for HFT-specific policies. However, ASX supports ongoing monitoring by ASIC of the growth and nature of HFT activities. Such measures may be considered in the future should concerns arise.”

In preparation of the introduction of competition in the marketplace, the ASX has taken several measures to bolster its operations. In addition to lowering fees, new functionality has been added, trading capacity has been increased and latency has been lowered. It has also developed a new smart order router, which, along with other services, it will be offering to competing venues.

“ASX is a versatile business providing exchange services beyond traditional listing and share trading. In addition to the launch of PureMatch, there has been the creation of a multi-market smart order routing trading application, ASX Best, and a trade acceptance service that will clear and settle trades executed on other trading venues in an identical manner to trades executed on ASX’s own equity market. We are also developing services for other listing and trading venues. With the challenges of the new environment come opportunities for ASX to expand our range of products and services, and build new revenue streams.”

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