Last Friday, the Australian Securities Exchange’s (ASX) VolumeMatch service was officially discontinued, ending one of the ASX’s first forays into services intended to help it effectively compete in a multi-venue market since the launch of Chi-X Australia in October 2011.
A spokesman for the ASX commented via email that “ASX’s other and more recent anonymous execution services – Centre Point and Centre Point Block – have proved to better meet the needs of customers.”
Market participants had criticised the VolumeMatch venue for poor design.
“We never really looked at it,” commented one Australian head of trading who declined to be named so that he could speak freely. “There were no volumes going through it so we didn’t use it – there was never really any spark. You need more than a couple of buy-side guys to make a market.”
The trader said from the outset the system had been “cumbersome to get into”, and added that because of a lack of broker support, there was unlikely to be much impact on the market by VolumeMatch’s closure.
“Centre Point Block; this re-incarnation effectively replaces it anyway, but with a different mechanism this time,” the trader said.
Centre Point, anonymous mid-spread matching solution, was launched in 2010. Centre Point Block is a service to support users seeking larger block execution by letting them nominate a minimum fill size for their anonymous block order. It and a range of improvements to Centre Point were announced in June of 2012. Centre Point has enjoyed much more success than its predecessor, for example most recently seeing Morgan Stanley sign up to the service on 7 November, and securing a market share of 3-4%.
ASX’s spokesman noted the main differences between VolumeMatch and the Centre Point services include: VolumeMatch had an execution threshold of A$1 million, while Center Point has no threshold and Center Point Block has A$50,000. VolumeMatch was restricted to executing within revolving three-minute block periods with a static price, while Centre Point offers continuous execution at a dynamic price.
Chi-X declined to comment directly on VolumeMatch, but Jason Keady, director of markets and operations for Chi-X Australia, said his service was “not a dark pool, so we don’t view it closing down as affecting our business. That aside, we are pleased with the market’s response to enhancements we made to the Chi-X Mid-Point order and trade reporting services.”
In terms of competition in the marketplace and whether more or less venues is better for customers, Keady said: “What is best for market participants is if they have a range of execution venues that allow their trading strategies to be implemented efficiently. One venue can’t meet the diverse needs of all participants. If venues are going to work, they need to deliver value for trading participants… In Australia, we still have a relatively small number of venues and no real problem with fragmentation. And we’ve seen the benefits of having competition in cash equities trading – price improvement opportunities for investors, lower trading fees, and innovation – that competition delivers.”