The Australian Securities and Investments Commission (ASIC) has launched a consultation prior to opening up the Australian capital markets to competition between trading venues.
The consultation period for the proposals is open until 21 January 2011, after which the regulatory guidance will be released “as soon as reasonably practicable in 2011” according to ASIC.
The timeframe for effecting the regulatory change will be a blow to Chi-X Australia, which had originally planned to launch in Q4 of 2010, and more recently had hoped to launch in Q1 2011. The delay in changes to regulation have been blamed in part on ASIC's concerns about market stability as other markets around the world have faced challenges stemming from increased trading volumes and the effects of automated trading.
The Australian government announced its tacit support for competition to the incumbent Australian Securities Exchange (ASX) on 31 March 2010 when it gave in principle approval for alternative venue group Chi-X Global to be granted a license to operate in the country.
On 25 October ASX announced it intends to merge with the Singapore Exchange (SGX), a move that would protect it somewhat against new entrants into its home market.
The Australian financial regulator made the latest proposals in Consultation Paper 145 ”Australian equity market structure' launched on 4 November 2010. The paper also addresses options for modernising the market in light of developments and events, that have affected capital markets globally, such as the 6 May ”flash crash'.
In addition to opening up the market to competition, ASIC also proposed: market operators should effect pre-trade risk management controls and circuit breakers to prevent the events such as the ”flash crash'; pre-trade risk management controls should be imposed for brokers, in line with the ban on ”naked' access imposed by US regulators on 3 November; that best execution policies should be introduced to support buy-side trading objectives; and pre-trade transparency requirements for orders not considered large in size (equal or greater than $20,000).
Many of these are in line with proposals ASX made about its own operations in February 2010 and rules imposed by US and European regulators.