The New Zealand Exchange (NZX) has signed a deal with Citigroup, CommSec, Goldman Sachs JBWere, Macquarie Bank and Merrill Lynch to launch an electronic communications network (ECN) that will provide off-market trade execution reporting services to brokers in Australia.
The new service, which will launch in the first half of 2007, will compete directly with services provided by the Australian Stock Exchange (ASX), which merged this year with the Sydney Futures Exchange (SFE). NZX says the ECN will provide market participants in Australia with a choice of reporting services.
The New Zealand exchange will hold a 50% stake in the entity, with Citigroup, CommSec, Goldman Sachs JBWere, Macquarie Bank and Merrill Lynch each holding ten per cent. Financial terms of the deal were not disclosed.
In a statement, NZX says the shareholders believe the time is right to introduce a degree of technological and price competition in a subset of exchange services currently controlled by the ASX.
The decision to establish the ECN follows a lengthy and detailed assessment of the Australian market over the last three years.
Mark Weldon, CEO of NZX, says the new Australian ECN is being created to boost competition in the Australian capital market.
"We are working closely with all relevant statutory bodies to ensure a seamless entrance into the market," Weldon says.
The board of the new Australian ECN will appoint a CEO in due course.
NZX says likely uptake from the broker shareholders of the reporting product also provides a high degree of potential revenue during the launch phase.
The exchange will provide technology, market supervision and administration services to the ECN under a fixed price service contract.