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Too early to tell?

Hope you like the new dedicated Australia page on the Frag website. Even if you’re not directly interested in antipodean fragmentation, Australia will provide a particularly pure data set for what is fast becoming a global phenomenon. This is because (right now at least) there is only one primary and one alternative venue. It’s too early to draw any meaningful conclusions but, as the charts below show, Chi-X Australia seems to have made a more positive start than its counterpart in Japan. This is shown by the fact that Chi-X Japan took almost six months to achieve the same share of trading volume captured by Chi-X Australia in its first two weeks of operation. Then again, Chi-X Japan faced a more complicated clearing and settlement situation and had to contend with a short selling ban, too.

It’s also interesting to note that average trade size for Chi-X Australia is around one third of the market average. Is this indicative of greater HFT activity? And, if so, will this mean greater volumes for all concerned, or is it just more noise for the buy-side to contend with (one of the great unintended consequences of the pro-competition regulations in the US and Europe)?

Whatever happens, Australia will take its own path and I am sure that other alternative market operators will be studying its progress with interest.

One Response to “Too early to tell?”
  1. Tim Quast says:

    Steve, “Antipodean Fragmentation” probably isn’t a great name for a rock band, but your observation is interesting. Smaller trade sizes, rapid share gains. Certainly the marks of HFT.

    I chiefly wanted to observe in regard to your comment on “pro-competition regulations” that there is no such thing. It’s an oxymoron. Regulating only improves the competitive of those best able to comply with rules.

    Since the rules said trades must match at the best bid or offer (unless exempted — and why have a rule if you’re going to create exemptions to it that don’t apply uniformly?) via automated quotes and mandated linkage, we got exactly what one would expect: markets controlled by the fastest price-setters and dominated by arbitrage.

    Sorry to hand this blight down under to the poor unsuspecting folks interested in risk-taking capital-formation.

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