Dark pools, high-frequency trading and competition
A speech by Shane Tregillis, ASIC Commissioner, at the Stockbrokers Association of Australia Conference 2011, Hilton Sydney, 26 May 2011
This year's annual stockbroker's conference is occurring at a watershed for the Australian equity markets with a competitor for ASX due to commence before the end of 2011.
Our futures and equity trading markets have always been dynamic. However, on a periodic basis, changes occur that reshape more fundamentally the landscape.
In the 1980s we saw the merger of the state based exchanges into the national stock exchange.
In the 1990s there were a series of major market structure changes including:
the shift to fully electronic trading and consequential closure of the trading floors;
the creation of an electronic share register (the CHESS system);
demutualisation of the ASX;
the creation by the SFE of its own local clearing house; and
closure of the futures trading floor.
And then in this decade we saw the merger of the futures and equity exchanges and significant changes to market dynamics arising from automated order processing.
All of these changes were challenging for market participants—and some did better than others in taking advantage of the new opportunities whereas others struggled to adjust their business models to the new environment.
The introduction of competition between equities exchanges in Australia is another such game changer.
I suspect we are just at the beginning in fully understanding the way in which competition, driven by technology and the increasing global nature of the markets, will impact the market and market participants in coming years.
These changes will also have a significant impact on ASIC as the market regulator going forward. It is clear that ASIC will need new skills, technology and capabilities in the coming years.
All we can be sure of now is that the change will be dramatic, and will play out in unexpected ways.