Bourse operator Chi-X launched stock trading in Australia today, ending a two-decade monopoly held by ASX Group, which only last week suffered a technical glitch that shut down trading one day for four hours.
Chi-X, controlled by Nomura, now offers just eight securities, which includes global miner BHP Billiton and top supermarket chain Woolworths. Volumes were a trickle compared to the incumbent but Chi-X is expected to gain market share once brokers are assured of execution reliability.
It will also expand to offer all securities once it satisfies the regulator over the reliability of its systems.
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"Once we are comfortable with the execution of our internal order flow, we will commence migration of all desks to access Chi-X by default alongside the ASX," said Steve Hammerton, head of direct execution services and portfolio trading for UBS Australia.
"We expect volume on Chi-X to reach around 10-15 per cent over the next six months as brokers move to trade on the new exchange."
UBS is one of the 22 firms to have signed up with Chi-X. Others include Deutsche Bank, JPMorgan, Citigroup and Macquarie.
Chi-X was among the first entrants in places such as Europe, Canada and Japan when competition was introduced, shaking up established players as new platforms armed with fast trading technology and smaller overheads slashed fees.
The launch comes after ASX suffered an embarrassing outage on Thursday that halted the market for four hours. Chi-X, which is expected to compete on cost, has said its systems would be able to keep trading in circumstances such as last week's halt.
"We welcome the launch, which marks the start of a new era for Australia's financial market and fulfils the Government's promise to open up Australia's equity market to competition," Treasurer Wayne Swan said in a statement.
Competition is vital for the development of Australia as a financial services centre," Swan said.
The launch of an alternative stock exchange is part of Australia's plans to establish itself as a regional financial hub.
Rival ASX's plan to take on competition at home and internationally by merging with Singapore Exchange was scuppered when regulators blocked it citing national interest.
ASX has, however, set in motion a series of measures to hold ground, including cutting fees by 40 per cent, boosting speed and rolling out a new data centre to encourage high-frequency trading.
Chi-X has announced trading fees up to 40 per cent lower than ASX in a pricing model that offers a rebate for traders placing an order and finding a match. Brokers coming in to find a match will be charged more.
Volumes in Chi-X traded securities were between 0.05 per cent and 2 per cent of the same ASX listed securities in afternoon trade, Thomson Reuters data showed. Volume was highest in QBE Insurance and lowest in CSL, the data showed.
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