Chi-X turns the key and market monopoly ends

THE volumes were tiny yet symbolic. A test parcel offered here. A curiosity bid there. But for the first time, they were share trades not made on a monopoly market run by the Australian Securities Exchange. Share trading in Australia took its first steps into the world of competition yesterday as Japanese-owned rival Chi-X opened for business.

Immediately, trading prices fell for customers and revenue began bleeding from the erstwhile monopolist.

Chi-X said almost $4 million in shares changed hands in more than 800 trades in a limited market, offering six stocks and two exchange-traded funds on the new platform.

But it's not the end for the ASX just yet. It performed about $4.3 billion in trades yesterday.

While Chi-X boss Peter Fowler was not keen to disclose many details, information readily available on Chi-X's website and via Bloomberg reveals how small the baby steps were that Chi-X took on day one.

Just 2000 Leighton shares were traded on Chi-X compared with 700,000 on the ASX. And 62,000 BHP Billiton shares were traded on the new platform compared with more than 13 million on the ASX.

Although Mr Fowler said an ''initial look'' at prices on the two exchanges showed that ''throughout much of the day better prices were available on the Chi-X market'', data published by the two exchanges shows Chi-X did not provide the intraday low on any of the six company stocks traded compared with the ASX.

Share-price spreads differed greatly on the two exchanges. While BHP shares traded almost identically on the two platforms, big price differences could be observed in stocks such as Leighton and Woolworths. Leighton traded in a price range on the ASX of $21.61 to $22.38 before closing at $21.84. On Chi-X its low was $21.72, its high $22.07 and it closed at $21.92. Profiting from the spread may have been difficult given the low liquidity.

The different trading prices can be expected to smooth out as greater liquidity moves into the alternative market, in particular from high-frequency traders, looking to profit in the flash of an eye using high-powered computer programs from price differences between the two exchanges.

After last Thursday's technical glitch that closed the ASX for half a day, Mr Fowler said: ''I'm very pleased, delighted to say we've had a largely uneventful day, no surprises. It was exactly what we were hoping for.''

Traders used the day as a ''road test'', he said. ''I have a feeling some of them were very much toeing the water, just to test their systems were operating properly.''