The platform is slated for a November launch, and will provide access to all of the 2,000 stocks on the exchange, plus derivatives, exchange-traded funds, warrants and interest rate securities. The second platform, PureMatch, will be run parallel to TradeMatch and is being built for high-frequency traders. But it will only offer access to the largest 200 stocks – curbing the black boxes’ ability to trade further down the food chain – and no crossing mechanisms through its colocation facility, which is still under construction. But co-location will offer traders “zero latency” because their computer servers will be “sitting in the host, the ASX system,” Murphy said. “A lot of high frequency trading is attracted by two markets operating in parallel…The ability of the trader to arbitrage the two prices is what will attract high frequency traders to this market.” Murphy has not disclosed the pricing mechanism that ASX will subject high-frequency traders to, but Fowler at Chi-X says the entrant’s new venue will employ the “maker taker” arrangement it uses in Europe.
This provides stock sellers – or liquidity ‘makers’ – in Europe with a 0.2 basis points rebate for using Chi-X, while the venue receives 0.1 basis point, from the 0.3 basis points execution fee paid by the purchaser of the stock. But Fowler would not reveal the precise earnings that makers and the venue would take by selling through Chi-X Australia. Currently, the ASX charges 0.28 bps for each trade. Fowler admits that “we’d have to come in below 0.28 bps to make it attractive”. In addition to the new parallel trading platforms, the ASX is developing a range of new order types: -Centre Point Order, enabling investors to anonymously transact at the ‘midpoint’ price between the best bid and offer on the ASX Central Limit Order Book; -Centre Point Crossing, which provides a 30 second window between initiation and execution of a cross at a midpoint price; -Undisclosed Orders, which can be used when executing large orders worth more than $500,000.
This volume will be invisible to the general market, but the transaction price will be visible, and the orders will be subject to the same timing and pricing priority rules. Once the remaining volume to be transacted falls below $500,000, the amount to be executed will be visible; -Iceberg Orders, which allow for big orders to be executed in stages. “For orders of 10,000 shares, you don’t want to drop that straight into the market,” Murphy says, so an order of 1,000 shares will be submitted, executed, and followed by another order of the same amount until the all 10,000 shares have been executed; and -VolumeMatch, which provides pre-trade anonymity for orders above $1 million. It will also target the best price during a day’s trading – outside of the morning and afternoon auctions – for execution. The ASX will also run a smart order routing service, called ASX Best, enabling participants to find the most advantageous means of executing trades through the bourse and, potentially, through competing market operators in the future, Murphy says.