Recent Developments in the Australian Capital Markets

Capital markets worldwide have undergone radical transformation over the last decade with heightened competition among the stock exchanges. This has mostly been a US-Europe phenomenon with the Asian exchanges landscape being dominated by national exchanges. However, the situation is slowly changing. Recently Australia undertook initiatives towards making its securities market more competitive by breaking the monopoly enjoyed by the Australian Securities Exchange (ASX). Till now the ASX was responsible for surveillance of trading activity in Australia; but according to a new legislation, the Australian Securities and Investments Commission (ASIC) will now take over the supervisor role from ASX. This decision, which took over two years’ assessment and deliberation, was necessary to allow new competitors of ASX to enter and access the securities market. As a result, Chi-X Australia has already received an approval from the government and will possibly be the first player to enter into this evolving market. A US institutional broker Liquidnet and a New Zealand Stock Exchange backed platform are also seeking licenses to operate in the Australian market. Amidst this evolution, ASX has taken a number of initiatives to meet the new challenges of a competitive environment and maintain its stronghold in the market. Recently it consulted with a broad range of market participants, end-users, vendors as well as regulators to improve its service offerings. Besides deciding to slash its main trading fees the ASX is planning to launch three new trading platforms by 2011, each targeted at different customer segment. VolumeMatch, a block matching facility that allows matching of orders anonymously, is targeted towards sell side players. TradeMatch, an ultra-low latency, high capacity, trading platform that will provide a full functionality trade execution for all ASX-quoted securities, is scheduled to be launched in November, 2010. Third is PureMatch, an adjacent ultra-low latency execution facility for the top 200 ASX listed securities. It is targeted at high frequency traders and scheduled for release in early 2011. These developments can be potential game changers in the Australian context. They can also bring major changes in other Asian countries as regulators in the region will be keeping a close eye on Australia.