ASIA

SBI Japannext grabs 5% of TSE volumes

Proprietary trading system SBI Japannext broke the 5% barrier in trading volumes on Friday 18 May, the first time a PTS has taken that much share of the trading on the Tokyo Stock Exchange.

By Gavin Blair  May 23, 2012 2:17 PM GMT

Proprietary trading system (PTS) SBI Japannext broke the 5% barrier in trading volumes on Friday 18 May, the first time a PTS has taken that much share of the trading on the Tokyo Stock Exchange (TSE).

SBI Japannext, launched at the end of 2006, had been running largely neck and neck with Chi-X Japan, the local platform of Chi-X Global that bowed in 2010, but has pulled ahead of its newer rival in recent months. In April, SBI Japannext had a market share of 2.9%, compared to Chi-X Japan’s 2.09%, according to figures from Thomson Reuters.

“We’re delighted of course to have achieved 5% last Friday, and we did 4.82% today [Wednesday 23]. We are trying to continue to grow our market share organically, though overall volumes on the TSE are pretty flat,” said SBI Japannext CEO Chuck Chon. 

Trading volumes on the TSE have been falling steadily in recent years, with the average daily volume dropping by a third since 2008, while daily trading value has more than halved over the same period. The Nikkei 225 index closed down 1.98% at 8.556.6 on Wednesday, hitting a four-month low and giving up nearly all the gains achieved during the rally in the first quarter of the year.  

SBI Japannext is upgrading its trading engine to the X-stream INET platform from Nasdaq OMX, which is expected to come fully online in September and will allow it to trade orders in less than 100 microseconds. The alternative trading venue is also in discussions with three new members, who are due to sign up within the next month.

Combined volume of the two main PTSs now exceeds that of the Osaka Securities Exchange (OSE), though the bourse’s traditional strength lies in derivatives rather than equities. The OSE is due to merge with the TSE in January 2013, subject to regulatory approval.

One of the main motivations for the merger is widely believed to be the increased competition from the PTSs. Opponents of the OSE/TSE tie-up have pointed out that it will increase the domination of the central exchange at a time when the global trend is towards fragmentation of liquidity.