Competition on the Rise Down Under01.26.2012
Three months after the introduction of alternative trading system Chi-X Australia, the nation’s number two stock exchange counters in a move to bolster its standing.
The National Stock Exchange of Australia has dropped its broker application fees with the hopes of challenging the listings dominance of the Australian Securities Exchange. The goal is to have more brokers offering NSX-listed securities to a larger group of domestic and international investors. It will also “enhance NSX’s attractiveness” to companies considering listing on an Australian stock exchange and “help challenge ASX’s listing monopoly.”
In contrast, the ASX charges a A$100,000 fee to join the venue as a broker, on top of the various setup and connectivity fees.
The 75-year-old NSX, formerly known as the Newcastle Stock Exchange, is publicly traded on the Australian Securities Exchange. It is all-electronic, and is the second largest stock listing venue in Australia, specializing in growing companies. It currently lists 120 securities, after it absorbed the former listings of the Bendigo Stock Exchange, which it acquired in 2005. It also acquired the Water Exchange, which facilitates the trading of permanent and temporary water entitlements, in 2007.
The incumbent Australian Securities Exchange has been ramping up its operations over the past several years in anticipation of lowered barriers to entry, which has allowed upstarts such as Chi-X Australia to enter the market.
“ASX is well prepared for the new competitive market environment and is continuing to expand its range of products and services, develop new solutions for our customers, and build alternative revenue streams,” said Richard Murphy, ASX General Manager Equity Markets via email.
Chi-X Australia launched in late October and quickly reached over 2% market share within its first month. The company is aiming for 10% market share in the nation, which would be an important symbolic milestone for the company, which is trying to break the near monopoly of the ASX. It will look to do that through aggressive pricing.
The ASX hit back shortly after Chi-X’s inception 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,” said Murphy. “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 a key part of our cash equity trading strategy going forward.”
The ASX also slashed its own fees in half in the months leading up to Chi-X’s launch and has put a renewed focus on increasing speed.