Australia to set framework for new trading platforms

August 24, 2009

RIOTINTO-CHINALCO/   By Sonali Paul
   MELBOURNE, Aug 24 (Reuters) – Australia’s market regulator will take over supervision of real-time trading on the Australian Securities Exchange (ASX), a first step in a long-delayed government plan to allow multiple operators in a A$1 trillion market.
   Presently, the ASX <ASX.AX>, which handles trading in companies worth a combined A$1.1 trillion ($918 billion), has a near monopoly on financial market trading in Australia.
   Three potential rivals to Asia-Pacific’s third-biggest listed bourse have been looking to grab some of the business in large wholesale trades, which make up almost a third of all trade.
   Currently, individual markets, like ASX, self-supervise trading, while the regulator enforces laws against misconduct.
   The regulatory move follows similar measures in other countries to centralise regulation of markets, independent of the exchanges. Australian exchanges will remain responsible for supervising listed entities.
   A supervisory framework is crucial to preventing problems with executing trades on rival platforms, said UBS analyst Chris Williams, “because, frankly, the experience of multiple market operators in both Europe and the U.S. has been a debacle.”
   Applications for market licences by the ASX’s rivals were put on hold a year ago when the global financial crisis hit trading volumes.
   Before considering the applications, the government wants to centralise trading supervision in the hands of the Australian Securities and Investments Commission (ASIC) by the third quarter of 2010, the government said in a statement on Monday.
   One of the applicants, AXE ECN, said last year it aimed to capture about 13 percent of trading volumes in its first stage, by focusing on wholesale trades.
   AXE ECN is a joint venture between New Zealand exchange operator NZX <NZX.NZ> and six major brokerages: Citigroup <C.N>, CommSec <CBA.AX>, Goldman Sachs JB Were <GS.N>, Macquarie Bank <MQG.AX>, Merrill Lynch <BAC.N> and Credit Suisse <CSGN.VX>.
   The other applicants are Nomura’s <8604.T> Chi-X, which operates in Europe, and U.S.-based Liquidnet.
   “Mind you, I don’t think the deferral of a decision on licences to no earlier than the December quarter 2010 is going to be encouraging to any of the license applicants,” Williams said.
   NZX Chief Executive Mark Weldon has repeatedly expressed frustration with the delay, calling the process “disgraceful”.
   “We have no confidence at all in that process,” Weldon told Reuters at the time. 
   “All it’s really done is give the ASX time to shuffle its pricing around, so its profits are still the same, but the contestability of that area is reduced,” he said.
   NZX wrote down the value of its investment in AXE ECN in its first-half results in early August.
   ASX and regulator ASIC backed the timeframe and steps outlined by the government to hand over responsibility for real-time trading supervision. [ID:nSYU007088]
   ASX shares fell 2.8 percent to a six-week low of A$33.51 in a broader market up 2.8 percent. NZX shares slipped 0.3 percent to NZ$7.65, lagging a 1 percent gain in the broader New Zealand market <.NZ50>. ($1=1.198 Australian Dollar) (Additional reporting by Adrian Bathgate in WELLINGTON) (Editing by Jonathan Standing and Valerie Lee) ((sonali.paul@thomsonreuters.com; +61 3 9286 1419; Reuters Messaging: sonali.paul.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)) Keywords: AUSTRALIA MARKETS/ 
  
Monday, 24 August 2009 08:31:20RTRS [nSYD369223] {C}ENDS

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