The Australian Securities and Investments Commission (ASIC) has published a new statistical series that seeks to improve disclosure relating to execution quality on Australian equity markets. Its new equity market data will be produced on a quarterly basis, with the first publication relating to the quarter ended March 2013.
Although the series is expected to shed greater light on execution quality as the data series builds, it already reveals how Australian equity trading has evolved in response to market structure changes, notably introduction of venue competition through the launch of Chi-X Australia in Q4 2011.
For the first quarter of 2013, the average number of trades per day stood at an aggregate of 884,943. On-order book trading on the incumbent Australian Securities Exchange (ASX) accounted for 580,659 trades. That represents 67.5% of the total volume, but just 53.2% of the value traded (A$2,620.5 million). In terms of the financial value traded, ASX auctions and ASX trade reporting for off-market deals reported to the exchange, amount to 12.7% and 19.5% respectively of total market value, which is significantly higher than the 2.7% and 5.2% of the volume percentage of trades that they account for.
Trading on Chi-X Australia’s order book accounted for 9.5% of volume, but 4.6% of total value traded in the March quarter, according to ASIC, while trades reported to the alternative venue stood at 67,967, or 7.3% of volume and 6.5% of value. The order-to-trade ration of ASX was 5.6 compared to Chi-X’s 14.9.
Comparative data is provided on the quoted bid-ask spread for all stocks, and what that presents is a drop in the spread from 24 basis points in the first quarter of 2012 to 21.4-22.1 basis points during the first three months of 2013.
Within just the parameters of S&P/ASX 200 stocks, this measure shows a continued improvement in market efficiency. The effective bid-ask spread has tightened from 14.8 basis points in the first quarter of 2012, to 13.7-13.9 basis points from January to March 2013.
Another trend line that is distinguishable is the average trade size, which in the last two years has fallen from just below A$10,000 to A$6,000. Such a reduction can be a marker of an increased use of algorithmic trading, which breaks up trades into smaller sizes.
In the same three-year timespan, the proportion of dark liquidity has started to shift. Having stayed around 22% to 24% of the total value traded until June 2012, that statistic has moved up to 30% in the last nine months.
As it is the first publication of its kind, comparative data between the current period and previous quarters is light. By the end of the second quarter we might see more patterns beginning to emerge in the information flow.