Published On: Wed, Mar 23rd, 2011

Regular Dialogue Between Regulators and Industry Key to Embrace Market Competition

Regulators and market participants should work together to identify appropriate solution to new regulatory issues accompanied by increasing competition in global markets, the Chief Executive Officer of the Securities and Futures Commission (SFC), Mr Martin Wheatley said.

Speaking at TradeTech Hong Kong conference March 22, Mr Wheatley noted secondary trading business of exchanges faces two forms of competition — the competition from alternative trading venues such as dark pools and high frequency trading, and from merged exchanges from a more macro level.

“The SFC welcomes competition as long as investors’ interest is not compromised and the market continues to be fair, efficient and has its integrity intact,” said Mr Wheatley.

While allowing other alternative trading venues to compete with exchanges does deliver some benefits to investors such as more competitive pricing, more innovative services and improvement in quality of services, Mr Wheatley said such competition will invariably result in a more fragmented market.

“Our concern is whether diverse platforms are accessible in a non-discriminative manner either directly or indirectly and whether multiple data sources can be reintegrated at the user level at a reasonable cost,” he said.

Mr Wheatley pointed out that Asian markets have the benefit of learning from US or Europe experience in adopting more sophisticated trading practice in the course of market development, adding it is important to embrace healthy competition in the trading space.

“Competition will bring in new types of market participants and trading behaviours which may challenge the status quo. Regulators, therefore, need to maintain a regular dialogue with the industry to obtain market intelligence on potential issues,” said Mr Wheatley.

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