KEY POINTS:
Sharemarket operator New Zealand Exchange's Australian start-up, AXE ECN, which hopes to poach business from the Australian Stock Exchange, is playing down the emergence of an American rival planning to do the same.
An Australian Securities and Investments Commission discussion paper shows the regulator has received an application from US institutional broker Liquidnet to trade ASX-listed shares.
Liquidnet is one of the top 10 brokers on the New York Stock Exchange, the Nasdaq and the London Stock Exchange.
It is looking to expand into Japan, Hong Kong, Singapore and Malaysia as well as Australia.
Liquidnet and AXE are targeting "crossings" on the ASX.
Crossings are off-market trades between a buyer and seller by the same broker and make about A$18 million ($20.4 million) for the ASX annually.
AXE chief executive Greg Yanco said Liquidnet, while also taking aim at the ASX's crossings business, was in a different market segment.
"Liquidnet are much more like a broker than an exchange, they deal directly with the fund managers and they have a system that anonymously puts deals together," he said.
"It's a bit of a hybrid. They are applying for the same sort of licence but they'll be dealing directly with the fund managers that are usually the clients of the brokers.
"They'd be more targeting the business as a small institution would do rather than having several participants and quite a lot of turnover."
AXE ECN will initially rely on significant trading volumes generated by its investment banking owners.
Yanco said he was "overall happy" with the ASIC's discussion paper, which is a step towards gaining necessary regulatory approvals for the venture.
However, the regulator was not likely to make its recommendations to the Australian Government until September, which would delay AXE ECN's launch until later that month or possibly October.
NZX shares closed 20c lower at $11.50 yesterday.
Trading Platform
* AXE ECN is the NZX's Australian joint-venture with leading investment banks Citigroup, CommSec, Goldman Sachs JBWere, Macquarie Securities and Merrill Lynch.
* An ECN (electronic communications network) is a high-speed, low-cost share trading platform.
* It enables large investors to report off-market trades or "crossings" between a buyer and seller by the same broker.
* US company Liquidnet is now looking to enter the Australian market with a similar product.
