May 17, 2012
Chi-X Global to focus on lit venues
Following last week’s announcement that Chi-East, the pan-Asian dark
pool, is to cease operations later this month, Chi-X Global CEO Tal Cohen says
the company will learn from the experience and is continuing to look for
opportunities with growth potential in both Asia-Pacific and Latin America.
Chi-East, a joint venture with Singapore exchange operator SGX and
Asia’s first cross-market venue, was unable to attract the anticipated
liquidity in a time of low volumes in global markets.
“It’s a shame we had to wind down as I think Asia would have benefited
if this venture had succeeded,” says Cohen.
Part of the reason Chi-East will close is due to timing and part is about
perceptions of the way the market is going to develop, Cohen explains. Volumes
are at historic lows, and in times of low volume, dark pools tend to do
disproportionately worse than lit pools.
“We also expected the introduction of regulatory reform in parts of Asia,”
he says. “In Australia, we welcomed CP 145 [a consultation exercise on market
structure] but had difficulties with ASX in the initial stages and couldn’t get
Australian stocks onboard when we would have liked.”
On the subject of Chi-X Global’s other market platforms, Cohen says Chi-X
will, for now, be concentrating on running its successful lit venues. Both
Chi-X Japan and Chi-X Australia have captured around 3% of volumes in their
respective markets and Chi-X Canada has captured 10% market share in volume
traded.
Chi-X Japan launched July 2010 and on 16
January had captured 3.86% of the value and 3.70% of the volume traded of the
Nikkei 225. By April it held 2.09% market share.
“We will continue to drive change and
competition through the introduction of new services and features,” says Cohen.
“Chi-X Japan currently offers Pegged Order Type, Post Only Order Type and will
be launching its Hosted Risk Controls service later this week.”
Just six months after launch, Chi-X
Australia today already accounts for approximately 3% of the country’s daily
volume, setting a new market share record on 17 May of 3.3%.
“Last week, Chi-X Australia launched its
much anticipated Trading Reporting, which will compete directly with ASX. We
have also seen a lot of interest in our Pegged Order Types since the market
regulators removed the AU$20,000 minimum order limit,” says Cohen.
“When you launch a new market, it takes
time for trading desks, smart routers and algos to connect to multiple
markets. We have 25 participants today, including Australia’s largest
retail broker dealer,” points out Cohen.
“What
comes naturally to us is establishing and running lit pools, and we’ll be
focusing on that in Asia and other growth markets such as Latin America.”
As for further expansion of Chi-X lit venues, Cohen says the company has
its “ears to the ground for developments in market infrastructure and the regulatory
environment across Asia”.
“We like the developments in Korea, we’re encouraged by what we’re
hearing from the brokerage community and the macro trends in the country,” says
Cohen. “The market is growing and trading is fairly active.”
Gavin Blair