A TOP US brokerage house has emerged as one of two firms vying to establish alternative platforms for processing trades in Australian Securities Exchange-listed companies.
A discussion paper released yesterday by the Australian Securities and Investments Commission says the corporate regulator has received an application from US institutional broker Liquidnet to trade ASX-listed shares independently.
Liquidnet's application accompanies a separate, previously reported request to process ASX trades from AXE, an electronic trading network backed by the New Zealand Stock Exchange and five of Australia's largest brokerage firms.
The two applications could break the monopoly held by the ASX in processing trades in companies listed on the Australian Stock Exchange.
Both Liquidnet and AXE will specialise in "crossings": these are trades where a single broker matches buyer and sellers on its own system and can process them directly.
For some crossings, the ASX requires brokers to disclose the deal 10 seconds before it occurs, which can affect the price of the security being traded. Liquidnet's Hong Kong-based managing director for Asia, David Klinger, said such measures restricted institutional investors from behaving as they were accustomed to in other markets.
"A lot of the people, especially in Asia, are global players," Mr Klinger said. "They were the ones who were saying to us 'Trading in Asia and trading in Australia is actually much harder than in the US or in Europe where the markets tend to be a lot more liquid, so we want you guys to come out and set up and help our trading in that part of the world'."
Liquidnet is ranked among the top 10 brokers on the New York Stock Exchange, the Nasdaq and the London Stock Exchange. In 2006, it traded an average 53.6 million shares a day. The foray into Australia is part of a five-country regional expansion strategy also targeting Japan, Hong Kong, Singapore and Malaysia.
Liquidnet and AXE have so far sought only to compete as trading venues, rather than offering the suite of listing and clearing and settlement services provided by the ASX.
In its consultation paper, ASIC recommends all trades in all venues be centralised so investors can be assured their decisions are fully informed. The paper suggests market operators may either nominate a third party to aggregate trading information or a new hub for trade reporting could be created "to be operated by one or more of the market operators, or an independent third party".
AXE chief executive Greg Yanco said platforms such as IRIS, Reuters or Bloomberg already collated data, and AXE was negotiating to integrate its information into real-time feeds for traders. Some widely used platforms had already integrated AXE into their information feeds, he said.