Markets: ASX Ltd's Chi-X acceptance

Elmer Funke Kupper has perhaps not waved the white flag but accepts Chi-X is here to stay.

It is no surprise the ASX chief executive opposed the entry of a competitor – Funke Kupper’s reason is that “fragmented markets are a bad thing”– but he seems resigned almost to losing as much as 20 per cent market share of lit equities orders to his almost two-year-old competitor.

The ASX has about 92 per cent of the lit market, the public market that excludes about 20 per cent of all equity trades because they are done in so-called dark pools, an anonymous matching often very large stock orders off exchange, by investment banks or specialist brokers.

That leaves Chi-X with 8 per cent of all lit equity orders in Australia and Funke Kupper says that may grow another 7 per cent or 12 per cent based on Chi-X’s ability to garner between 15 per cent and 20 per cent of such trading in the US, Canada and Europe.

The ASX chief says Chi-X’s entry has ‘rattled the cage” and forced the 152-year old exchange to “think faster on our feet” in order to “fight for customer share”.

“As a traditional exchange we’ve responded as well as we could have responded,” Funke Kupper told Markets Spectator.

But the market's overall size is not growing, limiting the earnings growth of the ASX.

There have been no new investors and no new liquidity, says Funke Kupper.