Australia: Preparing for Chi-X Securities Exchange debut

Derivatives Insights

Karen Cullen-Evans talks to Boardroom Radio about the impact of the new Chi-X equity trading market.

Preparing for Chi-X debut
David Bushby, Boardroom Radio Karen
Evans-Cullen, Partner, Corporate /M&A, Clayton Utz

David Busby

Today BRR speaks with Karen Evans-Cullen, a partner in the Corporate Advisory M&A Group at Clayton Utz in Sydney. Karen, the Chi-X Securities Exchange opens its doors for trading at the end of this month and will compete for the first time with the Australian Stock Exchange. What impact will this have on listed companies?

Karen Evans-Cullen

Well for listed companies David the impact of Chi-X commencing operations in Australia will be fairly minimal. Chi-X is initially going to offer trading in six stocks when it launches and it's then going to increase this to all of the 200 stocks in the S&P ASX 200 Index after six trading days so the first six stocks will be BHP Billiton, Woolworths, CSL, Origin Energy, QBE and Leighton Holdings.

S&P have said that they won't take trading on Chi-X into account when calculating all of their benchmark indices that they produce for the Australia markets, although they will monitor trading volume on Chi-X to see whether they need to reconsider this decision.

David Bushby

And initially with those first six stocks and then the rest of the ASX 200, do those companies really need to do anything?

Karen Evans-Cullen

No, they don't really need to do anything at all. It will just happen automatically. Chi-X is actually not going to offer its own listing, so listings of companies will still all be done through the ASX and this means that it really won't have any impact for the companies whose stocks are traded on Chi-X in terms of how they interact with Chi-X or indeed the ASX.

The possible positive effect I suppose for those companies whose shares are traded on both Exchanges will be that when they have improved liquidity in their shares for their investors.

David Bushby

And just with the start of Chi-X trading also comes the new ASIC rules governing competition between the Exchanges. What effect will this have for them?

Karen Evans-Cullen

Once again, listed entities won't really be affected by these new rules. The burden of complying with those rules is going to fall mostly on brokers and the Exchanges themselves and in particular because Chi-X won't be competing with the ASX for listings. Listed entities will continue to deal with ASX only in relation to all of the elements of being a listed entity like continuous disclosure, lodging documents, or getting securities quoted.

So this means that if you're a listed entity you only have to lodge information with ASX or apply to ASX to get new securities quoted and then will automatically just flow through onto the Chi-X Exchange as well.

David Bushby

And what about for market participants like brokers and traders and the like?

Karen Evans-Cullen

The main impact of ASIC's new rules on the market participants is the introduction of a best execution rule. This will mean that market participants are obliged to take reasonable steps when they're handling a client order in order to obtain the best outcome for their client.

The best outcome for a client may depend on whether they're a retail client or a wholesale client. In relation to retail clients the best outcome is usually going to mean the best total price whereas with wholesale clients there might be other factors which are relevant such as the timing at which you can execute trade and fulfil their order.

David Bushby

In terms of price say for on the retail side of things, are we expecting Chi-X to be a cheaper execution and therefore a broker would look to trade primarily through that platform if it is in fact a cheaper trade?

Karen Evans-Cullen

Yes well I think that's the reason why ASIC has introduced this rule because the pricing that Chi-X is going to be charging to the market participants is different. It's structured differently to the way ASX does it.

In particularly Chi-X is proposing to provide rebates to brokers in certain circumstances, so ASIC wanted to make sure that the choice of venue is governed by the price you can get or the outcome you can get for your client rather than the outcome the broker's going to get through trading on that venue.

David Bushby

And just to be clear we do know what that pricing structure is going to be or is?

Karen Evans-Cullen

Yes I think that has been announced, yes.

David Bushby

And just finally, what is next on the regulatory agenda for securities exchanges?

Karen Evans-Cullen

Well the Exchange competition is only, really only part of the story in relation to the development of the Australian Exchange industry. There's lots of changes obviously happening globally in that industry and they're flowing through to Australia.

I think the three major issues which are probably on the agenda for ASIC and the broader regulatory environment in Australia are high frequency trading, competition in the clearing and settlements industry and also dark pools.

In relation to high frequency trading, the key question here is whether ASIC has enough regulatory control to address the potential for flash crashes which are brought on by the electronic or algorithmic trading strategies that are employed in high frequency trading. So ASIC have said that they are looking at further regulatory changes or rules that they'll introduce in 2012 to deal with that.

In relation to dark pools, once again ASIC is looking at bringing in some new rules in 2012. The dark pool is a private electronic transaction network and typically they're maintained by the major banks and stocks are bought and sold by clients of those banks, and because the matching of the buyer and the seller is done entirely within the control of the bank, the bid offer and sale prices are not published to either the ASX or Chi-X when it starts. And the key issue is that if a significant volume of trading moves into these dark pools then this can impact on the quality of price information on the public markets like ASX and Chi-X. So I think ASIC is looking at how it can ensure that it maintains the quality of price information on those markets.

David Bushby

And is that, or that level of regulation or supervision, something that's not too far away? Are there positive steps being taken to deal with that?

Karen Evans-Cullen

Yes, ASIC put out a consultation paper in 2010 dealing with a whole range of structural issues in the Exchange industry. Dark pools and also the high frequency trading were things that they were considering in that and they've had submissions from people and they've said that they'll be ready to come out with some new rules in 2012. So they don't seem to be too far away on that.

David Bushby

Oh we'll certain keep a close eye on it and leave it there for now. But thanks again for your time today Karen. That was Karen Evans-Cullen a partner in the Corporate Advisory M&A Group at Clayton Utz in Sydney. If you have any questions for Karen please email her on

You might also be interested in ...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions