Chi-X, new rival to ASX, plans sharp fee discounts

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

Chi-X is planning to offer a 40 per cent discount to 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's chief operating officer, Peter Fowler, said the lower trading fees were aimed at facilitating a more liquid Australian market. Such a move would benefit 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, which is common in North American and European markets and has played a key role 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 Australian Securities Exchange's long-standing monopoly over share trading. Mr Fowler said Chi-X had received strong support from the market, with 22 brokers lodging an application to participate at the market launch.

They include major institutional brokers such as Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and UBS.

ASX halved its trade-execution fees last year. This was partly behind an 11 per cent drop in its cash market revenue over the past year.

A spokesman for ASX was not immediately available last night.

Chi-X recently told brokers that the first week of its trading would be a "soft launch" that provided settlement cycles across six bluechip stocks BHP Billiton, CSL, Leighton Holdings, Origin Energy, Woolworths and QBE Insurance.

From then, the new Chi-X platform would allow for trading in shares of all 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 the market regulator, the 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.