"The next 12 months will be challenging for the ASX."
"CHI-X, the company set to break the Australian Securities Exchange's monopoly over share trading, is understood to be talking to international clearing houses, including Fortis, about setting up in Australia, in a move that would further smash the ASX's lucrative $180 million-a-year cash market monopoly and cut overall prices.
The talks come as the ASX faces one of its biggest challenges since it listed on the exchange more than a decade ago. Besides the spectre of competition putting pressure on its share price, the ASX is facing an exodus of talent as it manages the transfer of the bulk of its market supervision powers to the Australian Securities and Investments Commission (ASIC).
In the past few weeks two senior executives have announced their departure and there is mounting speculation that ASX boss Robert Elstone will leave after his contract expires in July 2011.
A spokesman for the ASX responded to the speculation with the following comment: ''Robert Elstone's term as CEO of the ASX was extended in March 2009 to July 2011, at least.
Nothing further has been said. Any change to that timing will be announced to the market.''
The rumours spread after the ASX appointed a deputy chief executive.
Whatever the case, Elstone, and the rest of the investment community, is about to enter a new era. Managing the introduction of a new trading system - and any teething problems it might entail - along with the imminent arrival of competition following the government's approval ''in principle'' of a licence to Chi-X last month, heralds the rise of dark pools and alternative trading systems that can bring with it more risk and less transparency.
It is no doubt on the Reserve Bank's mind given its mandate to ensure systemic stability. The ASX's clearing house novates all transactions, which effectively guarantees the performance of all trades and reduces counter-party risk.
Wilson HTM analyst Andrew Hills offers a cautionary warning: ''Having studied exchanges for many years, I hope the government knows what it is doing. Retail and institutional shareholders and society in general won't be winners. The real winners will be algorithmic traders and large investments banks"...continues.
I wonder if the introduction of additional exchanges enables "rise of dark pools and alternative trading systems" means there are ways to further manipulate SP between the exchanges? I remember something said re this possiblity between double listings on Canadian and US exchanges. It appears that those familiar with exchanges have some doubts that the government knows what its opening us up to...imo.
