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Chi-X makes push for market share

MARKET upstart Chi-X Australia has made an aggressive push for market share ahead of its official launch next month offering stockbrokers hefty fee discounts over the Australian Stock Exchange.

MARKET upstart Chi-X Australia has made an aggressive push for market share ahead of its official launch next month offering stockbrokers hefty fee discounts over the Australian Stock Exchange.

The move is expected to see a competitive response by new ASX boss Elmer Funke Kupper who only started his new role last Thursday.

Chi-X is planning to offer a 40 per cent discount on ASX's standard fee per trade, according to a note sent to stockbrokers outlining the trading platform's new pricing structure. Chi-X will charge 0.18 per cent per trade compared with ASX's offer of 0.30 per cent per trade.

Chi-X Australia chief operating officer, Peter Fowler, said the lower trading fees were aimed at facilitating a more liquid Australian market. Such a move benefits all investors, he said.

The pricing structure provides an incentive for institutions to direct trades into the Chi-X order book by charging the provider of liquidity less for each trade.

This is known as the "maker taker" pricing model. It is common in North American and European markets and has been key in attracting liquidity to alternative trading venues.

After nearly four years of planning and regulatory approvals, Chi-X will open for business in Australia on October 31. The launch will break the ASX's long-standing monopoly over share trading.

Mr Fowler said Chi-X has received strong support from the market with 22 firms lodging an application to participate at market launch.

ASX halved its trade execution fees last year. This was partly behind an 11 per cent drop in the ASX's cash market revenue over the past 12 months. A spokesman for ASX was not available for comment last night.

Some 22 broking firms have signed on to use the new trading platform, including major brokers such as Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and UBS.

Chi-X recently announced the first week of its trading will be a "soft launch" that will provide settlement cycles across six blue chip stocks. These are BHP Billiton, CSL, Leighton Holdings, Origin Energy, Woolworths Ltd and QBE Insurance.

From then, the new platform will allow for trading in shares of all of Australia's 200 largest listed companies. Before executing a trade, brokers will rely on smart order technology that compares stock prices across both the ASX and Chi-X platform.

Stockbrokers have been told by market regulator Australian Securities and Investments Commission to disclose their "best execution" policies to clients in the lead-up to the launch.

This information involves details on how the smart order routing affects the way the broker handles client orders.

ASIC has told brokers that it expects both ASX and Chi-X to align their trading hours until at least March next year.


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