Contrary to claims by ASX CEO Elmer Kupper, exchange competition lowers fees, brings new entrants into the market, reduces spreads, and makes markets more efficient, says global market structure analyst, TABB Group CEO Larry Tabb.
“But Mr. Funke Kupper said Mr. Tabb’s claims overlooked the cost to end investors of market fragmentation. Those costs could be 5-10 times higher
than the trading cost because fragmentation allowed high-frequency trading firms to get orders in ahead of traditional investors — known as frontrunning —
to influence the price of stocks in their own favour.” –The Australian Business Review, Oct. 1, 2015
According to Tabb, in a recent article in the Australian, reporter Andrew White confronted ASX CEO Elmer Kupper with my claim that the “duopoly market in Australia was not delivering the price and efficiency gains that investors enjoyed in the US, where there are more than a dozen exchanges.”
“With all due respect to Mr. Kupper, his response, above, included one purely outrageous claim (that competitive exchanges enabled “high-frequency trading firms to get orders in ahead of traditional investors — known as front-running — to influence the price of stocks in their own favour”) and another merely incorrect statement (when he said my “claims overlooked the cost to end investors of market fragmentation. Those costs could be 5-10 times higher …”).
I would like to address these two issues. First, I would like to counter the claim that HFT is a form of front-running. This is categorically untrue. Almost any way you cut it, HFT doesn’t “front-run” investors orders.”
For the full response, go to the just-posted http://tabbforum.com/opinions/competition-technology-and-market-efficiency-in-australia.