Australia Approves New Financial Markets Competitor

by Mary Swire, Tax-News.com, Hong Kong

09 May 2011

The Australian government has granted a licence to Chi-X Australia Pty Ltd (Chi-X) as an alternative securities exchange to boost competition in Australia's financial markets, as part of a broad agenda to build the country’s reputation as a financial services hub within Asia.

Wayne Swan, Treasurer, said that: “Competition in Australia's financial markets is critical to promoting exchange innovation, lowering transaction costs for market participants, leveraging our pool of national superannuation savings, and improving liquidity and access to capital for companies”.

In August 2009, the government announced reforms to transfer supervisory responsibility for Australia's financial markets to the Australian Securities and Investments Commission (ASIC). Since in-principle approval of Chi-X in March 2010, ASIC has worked to develop robust market integrity rules. These are designed to ensure the strength and stability of the financial system while allowing competition from alternative securities trading platforms.

The government also recently commissioned Australia's financial regulators to consider potential measures to preserve the integrity of its financial infrastructure, particularly clearing and settlement facilities, allowing oversight in all market conditions.

A subsidiary of electronic trading pioneer Instinet, Chi-X Global is a global provider of trading venues and market infrastructure technologies. The company aims to provide high-speed, low-cost trading alternatives to traditional exchanges and has operations in Canada, Europe and Asia.

The new market licence will be granted subject to Chi-X meeting strict conditions in relation to resourcing, including the establishment of an adequate compensation fund and vigorous testing of its technological infrastructure.

“ASIC will continue to work closely with market operators and participants during the coming months to ensure a smooth transition to full competition between securities trading platforms. This announcement is another important step in the government's long-standing agenda to build a competitive and sustainable financial system that works for all Australians”, said Swan.

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