Investors are set to get a better deal as competition heats up between Australia’s share trading platforms and its challenger.
Alternative listed securities market, Chi-X Australia, is going up against the Australian Stock Exchange (ASX) with its trading volumes and retail product offering of TraCRs and Chi-X Funds.
Speaking at a media briefing in Sydney, Chi-X chair David Morgan says that the main driver of productivity is competition.
Morgan says: “We brought competition to an area that was previously a monopoly and that competition has been undoubtedly beneficial to the financial services economy, reducing the cost to trade and introducing innovative new products.”
The alternative exchange has around 20 per cent of share trading volumes in the Australian market and is trading upwards of $1 billion per day.
Nearly fifty brokers, including market leader CommSec, have access to trade on Chi-X in conjunction with the ASX.
Broker access to two trading platforms results in investors getting the best trading price on stock.
Chi-X’s first actively managed ETF, the ActiveX Kapstream Absolute Return Income Fund, was launched in October and is the first of a series of ETFs that will be exclusively quoted and traded on the exchange.
Schroders, Daintree and eInvest all have plans to launch active ETFs on Chi-X in the near future. According to Chi-X chief executive Vic Jokovic, Chi-X has every other major ETF provider and a dozen global fund managers that have signed application forms to list their products.
Jokovic says: “The fact that quality fund managers, including global top tier names, are happy to uniquely list their products on Chi-X is a fundamental shift. Up until earlier this month, there was no other option of exchange for fund managers, it really all comes down to access.”
The alternative exchange has around 40 per cent market share of the daily ETF trading volume.
Jokovic says: “Our market share is significant. But what we haven’t had up until now is the ability to list those funds on Chi-X.”
Chi-X will be launching products based on its own index, the CXA 200. It came in to compete against the S&P ASX 200.
The main difference between the two is that all index values, whether real-time or end-of-day, are calculated using prices from trading in the Chi-X Australia market.
Chi-X says: “The CXA 200 Index will provide very similar returns to competitor indices at a significantly cheaper price. Hence financial products based on the CXA 200 Index should also be significantly cheaper for investors.”
In October last year, Chi-X launched its range of US listed transferable company custody receipts (TraCRs) to provide investors with exposure to US listed companies.
Investors have a beneficial interest in the underlying share and certain rights attaching to the share.
The 15 listings include those based on the shares of Amazon, Warren Buffet’s investment company Berkshire Hathaway (Class B) and pharmaceutical companies Johnson & Johnson, Merck and Pfizer.
The listings are based on broker demand and will likely include Starbucks, MasterCard and McDonalds in the next tranche. Jokovic expects to have around have an additional 20 companies added by the first half of 2020.
“The Australian market is heavily based on financials and mining and has limited access to technology names which is a huge part of the global and US market. This is about simplifying and making it easier, more efficient and cheaper to buy US names via TraCRs,” he says.
So far, Chi-X has recorded just 300 trades of TraCRs but is committed to increasing the brand awareness around the product.
TraCRs are settled through CHESS and are held on investor’s HIN in the same way as Australian shares. They may be converted into the underlying US share at any time, subject to the terms of issue (the investor will be required to have a custodian or broker account in the US where the share can be held).