New exchange may be Singapore SGX’s friendly rival
Chi-X targets big funds and hopes to collaborate and compete with SGX
By CHEW XIANG
(SINGAPORE) Chi-X, which operates a pan-European equities trading platform that has already captured a 20 per cent share of trading in FTSE 100 stocks, is looking to open an electronic stock exchange here as early as mid-2009.
It is targeting big funds and institutions and is likely to offer trading in large cap index component stocks for a start, Chi-X Global chief executive officer Tony Mackay told BT yesterday on the sidelines of the TradeTech Asia 2008 conference.
‘We’ve had a series of meetings with the (Monetary Authority of Singapore) and the (Singapore Exchange), we’ve made some good progress. They’ve been very responsive and open-minded but so far they haven’t committed to anything,’ he said.
However, talks over regulatory concerns are going ’smoothly’, he said. Chi-X is now preparing its application to the MAS and if all issues are ironed out soon, Singapore’s second stock exchange could be operating by mid-2009, he said.
It may eventually allow investors to trade Asian or even European and American stocks through its platform, he added.
Chi-X, launched in Europe in March 2007, now offers trading of equities from 12 European countries on the same platform. It also operates an electronic exchange in Canada and is one of three companies that have applied for a market licence in Australia. It is reportedly in talks with authorities in Hong Kong and Japan as well.
An MAS spokesperson said that ‘we welcome private sector innovations and initiatives to enhance the competitiveness of our capital market, as long as a fair, orderly and transparent market is maintained’ but pointed out that ‘the US and European experience has shown that a proliferation of platforms may lead to lower trading costs, but it may also increase inefficiencies due to greater market fragmentation.’
Mr Mackay said he was open to first starting up a dark pool here, before moving into operating a full-fledged exchange. Dark pools are off-exchange venues for matching trades without market impact. A number, including CLSA’s BlocSec and Liquidnet, are already operating here.
Chi-X differs from traditional exchanges in that it focuses entirely on trading, especially that of esoteric order types used by algorithmic traders. Mr Mackay said it would not be competing for new listings and would also not take on any supervisory role. It is also not targeting retail investors directly.
‘We are competing but also cooperating with the local exchange. What we’re doing is to support a small part of the market, the algorithmic, automated type of trading that needs very quick execution and low trading costs,’ he said.
‘Our platform can enable them to operate on very thin margins,’ he said. Trading fees, for instance, can be substantially lower than that charged by traditional exchanges. And unlike SGX, it does not charge membership fees.
But Chi-X is also looking to collaborate with SGX, for example, by ensuring that live best prices are shared across both platforms, which is not the case in London, Mr Mackay said. It is also hoping to use SGX’s clearing facilities and has no plans to set up a clearing house of its own.
Chew Sutat, executive vice-president and head of market development at SGX, told BT that any benefits from growth in market liquidity from dark pools or alternative trading systems should benefit the whole marketplace, not just the large cap stocks.
‘It will be positive for some investors but may not be so for all, especially if there is a potential fragmentation of the market. We will be happy to support (them) as long as it adds breadth and depth to the capital markets and benefits all our customers, including issuers and retail investors. Issues such as pre-trade search costs, timely post-trade reporting, and differential access for some investors also need to be properly addressed.’
Source : Straits Times - 20 Nov 2008
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