The Australian Securities Exchange (ASX) has chosen trading technology supplier Fidessa to provide the software and infrastructure for ASX Best, the bourse's new smart order routing platform.
The service, which is due to launch later this year, will enable users to route trades between different dark and lit Australian markets and consolidate market data from the various venues of their choice. It will be hosted in the ASX Australian Liquidity Centre, the exchange's new co-location data centre, and will also leverage ASX Net, its proprietary fibre network.
ASX Best will act as an upgrade to the ASX Trader Workstation, which only provides a direct connection to the exchange and does not have routing or data consolidation capabilities.
The launch of ASX Best is part of a number of initiatives launched by ASX to improve its service ahead of the imminent arrival of competing equity trading venues in Australia. Currently Chi-X Australia, the alternative trading system operated by Chi-X Global Markets due to launch on 31 October, is the only new venue set to challenge the ASX. Chi-X Australia will clear and settle trades using the ASX's existing infrastructure.
In addition to Chi-X Australia, ASX Best will also route orders to the ASX's three platforms: VolumeMatch, a block trading venue for orders above A$1 million; TradeMatch, which is designed for traditional equities traders; and PureMatch, a platform aimed at high-frequency traders that is due to launch towards the end of this year.
According to David Raper, general manager, trade execution and information services at ASX, the introduction of ASX Best is part of the exchange's diversification away from trading and execution services.
“Part of our strategy going forward is to extend our offering in the commercial technology space as well as execution,” Raper told theTRADEnews.com. “Market participants will have complete control over how they want to route orders to the various venues.”
Using ASX Best, market participants will combine pre-trade data from the venues of their choice to create a virtual market and route orders accordingly.
As well as ASX's existing Trader Workstation, Orc Software, SunGard and IRESS are among the technology firms that supply systems to access the Australian market using the exchange's data centre and fibre network. Brokers typically use multiple systems to route orders to the ASX depending on specific execution requirements.
According to Raper, over 80 of the ASX's 100 participants currently use the Trader Workstation. ASX Best will initially be offered to sell-side members, but Raper added that functionality to allow buy-side traders to connect directly to the service will be developed in due course.
When working with ASX to develop the solution, Steve Grob, director of strategy at Fidessa, said it was crucial to identify the different features of fragmentation in Australia compared to other regions. Unlike the US, for example, the obligation to provide best execution falls on the broker rather than the trading venue. National regulator the Australian Securities and Investment Commission (ASIC) is also developing plans to introduce a post-trade source of consolidated data, which will either result in the creation of a single consolidated tape provider chosen by an ASIC tender process or require ASIC to choose from a selection of competing providers.
“We have taken the core concept of our routing architecture and adjusted it to ensure it is relevant to the nuances of the Australian market,” said Grob. “Brokers will be able to subscribe to all the market data feeds they deem relevant and incorporate those to create a virtual market that matches their best execution policy.”