Chi-X Australia, an alternative trading system, is expected to launch in Q4 this year following the publication of a timetable by national regulator the Australian Securities and Investment Commission (ASIC) for implementing new market integrity rules.
After a consultation that is due to be held this month, ASIC will seek government approval for the market integrity rules in April and subsequently recommend that Chi-X Australia be granted a market licence.
Chi-X Australia will then have around six months to meet the necessary requirements for a phased launch of its market, which includes: establishing appropriate clearing and settlement rules; ensuring it has sufficient financial resources, systems resilience and staffing; and paying the necessary costs to ASIC for the extra surveillance associated with supervising multiple markets.
Domestic bourse the Australian Securities Exchange (ASX) acknowledged ASIC's timetable for competition and said it was “well-positioned to operate within the proposed competitive environment”. This includes the development of a new trade acceptance service that will allow Chi-X Australia and other prospective new market operators to access clearing and settlement services.
ASIC also recognised the steps that the ASX and other market participants will have to take to prepare for the arrival of Chi-X Australia. These include operating rule and system changes for simultaneously halting trades, implementing common stock and broker identifiers, amendments to brokers' order routing and back-office systems to comply with Chi-X Australia's rules and consolidation of Chi-X Australia and ASX data by vendors.
“Industry has told us it wants a timetable and an early indication of the regulatory framework in order to plan and allocate resources,” said ASIC commissioner Shane Tregillis. “The feedback is that at least six months is needed from when ASIC issues its final market integrity rules for competition. The timetable released today reflects this. The timetable also depends on market operators and market participants taking all necessary steps to get ready for competition over the coming period.”
The initial proposals on market integrity were included in a recent consultation on Australian market structure, conducted by ASIC, that closed on 21 January.
As part of the process for allowing competition to the ASX, ASIC has published an initial feedback document to the consultation paper, which elicited over 40 responses from a range of market participants. The regulator plans to consult on other issues discussed in the paper in due course, such as a threshold for dark pool trades, consolidation of post-trade data and maker-taker pricing, with a view to settling new rules in early 2012.
While there were no firm proposals in the feedback document, ASIC indicated that it is likely to proceed with a model where consolidated market data is provided by more than one entity. Those wishing to act as consolidators would have to comply with ASIC's best practice standards on data quality and security, although there is still the chance that the regulator could introduce a single consolidator via a public tender process if an adequate industry solution is not found. ASIC plans to consult further on its dark pool proposals later this year.