The Asia-Pacific region may lack regulatory drivers such as the markets in financial instruments directive in Europe, but alternative trading venues are slowly beginning to emerge.
A report from consultancy firm Celent found that 98.9% of equities volume is traded on exchanges in Asia, compared with 58% in the US and 70% in Europe.
But plans are afoot to change the situation, despite inefficient exchange matching systems, complex clearing mechanisms, as well as multiple currencies and languages.
Japan has opened clearing access to proprietary trading systems (equivalent to multilateral trading facilities) and Australia has changed its regulatory structure, making them the two markets most likely to undergo the greatest change in the next two years, according to Celent.
Glenn Lesko, chief executive of agency brokerage Instinet Asia, said: “The benefits of competition in trading in Europe are obvious. Instinet’s own research has shown a more than five-basis-point price improvement in off-exchange trades versus on-exchange trades. Traders in Asia can’t turn a blind eye to this.”