Andrew Walsh, managing director of Australia’s dominant share information and trading system IRESS Market Technology Ltd., says the entry of a second trading venue may attract other venues and further emphasise trading technology and order execution speed for fund managers and brokers.
“There is now a lot of focus on technology to ensure best execution and capacity to keep up with market change,” says Walsh. “Chi-X will introduce features never seen before in Australia and that may attract new participants. In turn, the Australian Stock Exchange will respond adding to the rate of change for everyone.”
IRESS has integrated its real time information and trading system software with Chi-X’s Mascot data centre and the ASX’s Gore Hill complex. Its new ultra-fast network has been launched across Australia. This will enable IRESS’s brokers to operate in a multi-market environment at the fastest possible speeds, says Walsh.
IRESS is used by 90 per cent of desktops and interfaces that interact with the Australian stock market. The company has a range of products. It provides discounts based on volume.
IRESS competitor Bloomberg LP charges about US$1,800 a month. But Bloomberg has not become a significant competitor to IRESS, says Walsh. He described Bloomberg as “being very popular for its chat community”.
Chi-X Australia’s chief operating officer Peter Fowler says the company wants to begin operating a lit liquidity pool by the end of October. Other off exchange venues, dark pools, may become available to Australian fund managers following Chi-X’s entry. This will make price discovery more important for brokers and fund managers, says Walsh.
Lit exchanges or pools display buy and sell orders. Dark exchanges or pools seek to match typically the day’s largest buy and sell orders. This is done anonymously to minimise information leakage that may adversely impact the trade.
Fowler says Chi-X has not yet made a decision on whether it will offer dark pool liquidity.
Message traffic on best bid and offer may increase as much as 1.5 times following Chi-X’s entry, says Walsh.
“The balance of power now rests with people who own the smart order router,” he says. “We can co-exist and compete with different networks and feeds that go to brokers and fund managers.”