Chi-X Australia, a wholly owned subsidiary of Chi-X Global LLC, launched on October 31, 2011 as a trading venue for the buying and selling of Australian cash equities. Chi-X entered the market to provide an alternative in competitive trading and market data services to that offered by the Australian Securities Exchange (ASX). This made Chi-X the first and only competitive exchange in the Australian marketplace for the trading of ASX-listed securities.
The challenge for Chi-X Australia was how best to enter a deregulating and evolving market that until recently had been a virtual monoply operated by the Australian Securities exchange. Although a global company, Chi-X had no prior presence in Australia. One of its key goals was to ensure that the launch was not seen as an added expense for potential partners, but rather to offer choice, price improvement and more flexibility in trading styles.
“In traditional exchanges, if participants want to connect to an exchange, unless they co-locate, they have to use the exchange’s carriers to access them. Many exchanges charge a premium price for this and that’s what we didn’t want to do,” said Mike Aikins, Chief Technology Officer, Chi-X Australia. “The key for us was to move fast, be ultra-low-cost and most importantly, from a participant’s perspective, have very low friction. We wanted to make connecting to us an easy decision.”
Solution and Value Realised
Instead of making market participants come to them to connect, Chi-X Australia’s strategy was to go to their clients. Central to this strategy was ensuring that not only was there proximity to the market participants, but also to key service providers, network operators and other major participants in the broader electronic trading community.
“We were looking for three broad classes of partners in a data center,” said Aikins. “We looked at the providers of software solutions for capital markets for trading systems. In Australia, we found that IRESS, supplier of share market and wealth management systems, has the overriding majority of the marketplace—and they co-locate with Equinix. Then we looked at the market data vendors and we found that leading companies such as Thomson Reuters and Bloomberg both have major presence within Equinix. Finally we looked at all the other participants and once again found that Equinix had the leading market participants.”
Chi-X Australia realized that Equinix allowed them to get more participation than if they had gone with another data center or if they had built their own data center.