CAPIX to float Online Trader

By ELI GREENBLAT
The Age newspaper

The Australian Stock Exchange could soon face a challenge to its control of the lucrative equity market, with the South Melbourne-based Capital Markets Internet Exchange group looking to replicate the success of online exchanges in the United States.

CAPIX is planning a $15 million float in July, and following a successful venture capital raising late last year the company is primed to take on the ASX at its own game.

CAPIX specialises in transaction processing technology for capital markets, with an emphasis on banking, broking and treasury.

The worry for the ASX, and all traditional exchanges, is that these electronic communication networks (ECNs) soon evolve into their own independent markets, where investors can buy and sell shares without going through the dominant exchange.

The managing director of CAPIX, Mr Peter Cooney, said the company would first aim to sign up at least six stockbroking firms, allowing the firms to later link together to form their own ECN.

"Australia is about two to three years behind what is happening in the US, but over time I think the ACCC (Australian Competition and Consumer Commission) will force the ASX to loosen its control of the trading in equities," he said.

"The ASX has become a company like any other after it demutualised. They are out to make a profit, and we are going to see more companies like ours starting to challenge the monopolistic hold it has."

This is certainly what has happened in the United States. Online exchanges that go by names such as Island ECN, Archipeligo and Instinet have quickly siphoned volumes from the New York Stock Exchange and Nasdaq.

It has caused traditional exchanges considerable heartburn as investors bypass the main markets and rob the exchanges of revenue.

Mr Cooney said the ASX should "welcome" the establishment of ECNs in Australia, with added competition lowering the cost of doing trades and, hence, encouraging more activity.

The ASX probably doesn't see it that way. One of the ASX's key sources of revenue is the money it makes as transactions are put through the market. If ECNs start to encroach on those transaction volumes it could put a serious dent in the ASX's bottom line.

Mr Cooney said the cost of buying and selling shares in Australia could drop from $6 to as low as 20 cents in three to four years.

He said the CAPIX prospectus was in the draft stage.

Mr Cooney said CAPIX has been making profits since its inception in 1991, and was completely debt free. CAPIX's clients include News Corporation, Boral, Ford Credit and a host of stockbroking and finance companies.

The Australian Stock Exchange could soon face a challenge as the Capital Markets Internet Exchange group looks to set up online exchanges similar to those it has in the US.
Picture: JOE ARMAO

Wednesday 26 January 2000

Back