Competition to domestic exchanges in Asia has risen in the last year, with SBI Japannext the latest alternative venue to surpass a significant market share milestone.
As the largest challenger to the incumbent Tokyo Stock Exchange (TSE), SBI Japannext reported a daily turnover record of US$1.07 billion on 19 December, surpassing its previous record of US$967 million.
According to monthly data from Thomson Reuters, the proprietary trading system accounted for 3.95% of trading in Japanese shares last month, compared to 2.3% for Chi-X Japan. Both venues have been battling for the position as the leading proprietary trading system (PTS) for the last year and have conspired to push the TSE’s market share to below 90%.
The numbers are growing evidence that PTSs are finally stamping their authority on the Japanese market ahead of the integration of the TSE with the derivatives-focused Osaka Securities Exchange following a US$1.6 billon merger of the two that was approved last month.The unified exchange will offer trading in approximately 3,500 listed companies with a combined capitalisation of around US$3.5 trillion.
Further growth of PTS market share is anticipated following the recent removal of the TOB rule, which compelled investors that approach a 5% stake in a company’s outstanding shares to launch a tender offer if they are traded away from the primary exchange.
“I believe it will have a positive and perhaps immediate market impact of 1 to 2% market share bump up for PTSs,” said Chuck Chon, SBI Japannext CEO, when the change was announced. “The TOB impact could be long-lasting and PTSs’ market share could go up to 10% of the market by the end of next year.”
In Australia, similar pressure is being exerted on incumbent bourse, the Australian Securities Exchange. For the first time in its history, the ASX faced competition through the long-awaited arrival of Chi-X Australia.
With its launch initially delayed a number of years due to the financial crisis and necessary changes to regulation that facilitated the arrival of competition, Chi-X Australia has begun to make its presence felt.
The alternate venue launched on 31 October 2011, and last month traded 7.9% of S&P ASX 200 constituents, up from 6.65% in October. A daily peak of 12.4% was also achieved on 22 November.
Chi-X Australia is currently in the process of finding a new CEO following the planned departure of current head Peter Fowler early next year.