UPDATE 2-Australia approves stock market competitor

* Australian government backs ASX exchange competitor

* Europe’s Chi-X set for 3rd quarter start

* Two others eyeing Aussie stock market, Asia’s 4th largest

* ASX shares fall more than 3 percent

(Adds details, ASX share performance)

By Rob Taylor

CANBERRA, March 31 (BestGrowthStock) – Australia’s government on
Wednesday backed competition for the country’s stock exchange
operator, announcing its support for ending the two-decade
monopoly of ASX Ltd (ASX.AX: ).

Minister for Financial Services Chris Bowen said he had
approved in principle a market licence application by Europe’s
Chi-X Australia Pty Ltd (Chi-X), sending ASX shares down by
more than 3 percent.

“Today’s announcement will be disappointing to some, but it
is the right decision, it is the right decision for Australia’s
investors and consumers and stockbrokers, and to promote
Australia as a financial services hub,” Bowen said.

A new share trading market should reduce share-trading
costs in Australia, Asia’s fourth-largest market, and attract
more investors.

Chi-X is one of three would-be rivals to the ASX, which
reigns over a market where more than $100 billion in shares
change hands every month, according to data from the World
Federation of Exchanges.

Chi-X is a wholly-owned Australian-incorporated subsidiary
of Chi-X Global Inc, which already operates markets throughout
Europe and Canada. Two other trading platforms, U.S.-based
Liquidnet and AXE ECN, have also applied to set up exchanges.

ASX shares (ASX.X: ) on the Australian Securities Exchange
fell as much as 3.1 percent to an eight-week low of A$33.94
before paring losses to 2.4 percent by midday. The stock has
risen about 46 percent from its early 2009 lows as investors
returned to riskier assets after the global financial crisis.

“The common view is that it (competition) will happen and
it will take a rather a large bite out of them,” said Burrell &
Co dealer Daniel Manley.

None of the three rivals is challenging ASX’s listing
business, which boasts 2,200 companies, but they see an
opportunity to eat into the business of transacting large
wholesale trades, known as crossings, which account for almost
a third of all trade.

AXE ECN is a joint venture between New Zealand exchange
operator NZX (NZX.NZ: ) and six investment banks and brokerages:
Citigroup (C.N: ), CommSec (CBA.AX: ), Goldman Sachs JBWere (GS.N: ),
Macquarie Bank (MQG.AX: ), Merrill Lynch (MER.N: ) and Credit
Suisse (CSGN.VX: ).


Bowen said only Chi-X was currently pressing its licence
application with Australia’s corporate watchdog, the Australian
Securities and Investments Commission (ASIC), which will take
over supervision of real-time real-time trading from ASX in the
third quarter of this year.

“Once ASIC has taken over supervision of Australia’s
financial markets, and once an appropriate period of settling
in has occurred, I anticipate that Chi-X will then begin
operations,” he said.

Bowen said he hoped the new competitive arrangements would
eventually lead to lower prices for Australia’s six million
largely mum-and-dad share investors.

“Certainly lower prices for smaller investors would be a
welcome development. Without competition there is no downward
pressure for any fees,” he said.

While competition between financial markets for trade
execution services is new to Australia, alternative trading
systems have successfully operated in the United States and
Europe for a number of years.

Bowen said the introduction of competition would bring a
significant change in Australia’s market structure with
implications for price, compliance and best execution.

“To ensure the integrity of the Australian market the
government is committed to ensuring that supervisory and
regulatory arrangements are established and communicated to the
market before competition is introduced,” he said.

Investment Analysis

(Editing by Kim Coghill)

UPDATE 2-Australia approves stock market competitor