People In The Trade: Tony Mackay
Published on February 13, 2008.
On 8 February, agency broker Instinet announced it was setting up Chi-X Global, a new holding company to house its Chi-X trading platforms. It also unveiled plans to create Chi-X Australia, which will complement Chi-X Europe and the soon-to-launch Chi-X Canada.
Tony Mackay, president and managing director of Instinet Europe, will become CEO of Chi-X Global. theTRADEnews asks Mackay why the new holding company was set up, and why Australia is the best place for Chi-X’s first foray into the Asia-Pacific region.
“There are a couple of reasons why it made sense,” says Mackay on the decision to establish Chi-X Global. “Firstly, we’ve got common technology across all the regions and a common market model, so it makes sense to centralise that in one place. Secondly, and importantly, it shows that we’re separating the Chi-X business from the Instinet brokerage business.”
He adds, “We’re effectively saying that the Instinet brokerage business and the Chi-X business are both run by the Instinet group as a whole, but that they are two completely separate business lines.”
Although Chi-X Europe was set up from the very beginning as a separate entity from Instinet Europe, the two companies shared offices and even staff. Mackay believes the new holding structure will make the separation between the brokerage and Chi-X businesses more distinct. “As we’re going into more markets, it makes it cleaner for us to separate everything at the top, at the beginning, even though we can still access the expertise Instinet has,” he explains. “For example when we go into Australia, we are hiring new staff rather than redeploying Instinet people.”
Instinet chose Australia as the location for its next Chi-X operation in part because the market’s structure suits Chi-X’s business model. Mackay says Australia’s sophisticated derivatives market is particularly attractive.
“Where you’ve got people that are essentially arbitraging between the cash and derivatives markets, they are particularly sensitive to the cost of trading on the cash side of the trade, and they are also particularly sensitive to the speed and the latency of doing those trades,” he explains. “Australia is a very sophisticated market, but maybe because they have not had competition there, the pricing and the technology are not as good as Chi-X can deliver. We believe that we can substantially reduce costs, plus improve the capacity of the Australian market, which should bring additional liquidity to Australia.”
Another attractive feature of Australia is the Australian Securities & Investments Commission (ASIC)’s interest in opening the Australian market to competition, as evidenced by its recent consultation of market members on the possibility of admitting alternative trading platforms to compete with the Australian Stock Exchange.
“Australia has an advantage in that the regulator is already looking at how to introduce competition into the marketplace against the incumbent exchange and clearing infrastructure,” says Mackay. “Other markets that one would imagine we would look at in the Asia-Pacific region haven’t necessarily got to that point in the regulatory development yet.”
