KEY POINTS:
Sharemarket operator New Zealand Exchange and its investment bank partners have selected a former ASX insider to lead their challenge to the Australian market operator's monopoly on share trading across the Tasman.
Greg Yanco, whose appointment as chief executive of NZX's electronic communications network (ECN) was announced yesterday,
has more than 20 years' experience in financial markets, including more than 10 in regulatory roles with the ASX.
That made him "ideally placed to lead the ECN", said New Zealand Exchange chief executive and ECN director Mark Weldon.
An ECN is a high-speed, low-cost trading platform that enables large investors to report off-market trades between a buyer and seller by the same broker.
The trades are known as "crossings", and make about A$18 million ($20.4 million) for the ASX each year, but Yanco said it was difficult to estimate accurately "because the Australian market's been growing so strongly recently".
"Crossings are generally about 30 per cent of the market. For our shareholder base, the average is closer to 40 per cent. It's generally higher for the institutional type of business."
Yanco was involved in a review of the ASX's crossing rules during his last 12 months with the company.
He said the ECN had similarities with the Project Turquoise venture being set up by seven investment banks which are unhappy with the fees they pay to exchanges in Europe.
The banks include the European arms of NZX's Australian ECN partners, Citigroup, Goldman Sachs and Merrill Lynch, as well as Morgan Stanley, UBS, Credit Suisse and Deutsche Bank which between them account for 55 per cent of trading volume on the London Stock Exchange.
The other partners in the Australian ECN are Macquarie Securities and CommSec.
But unlike Project Turquoise, the Australian ECN had an established exchange as a shareholder "providing the market and regulatory structure and a reputation for innovation", said Yanco.
NZX's involvement and the support of its five shareholders would make something really exciting.
"If you look at a start-up exchange or ECN you'd be looking for growth in liquidity. We're in the very fortunate position of having those five shareholders that are bringing liquidity to our market early on."
Yanco believed that initial liquidity would attract more order flow, and he said the response from other potential clients had been "overwhelmingly enthusiastic about what we're doing".
He was surprised an ECN hadn't been started in Australia earlier.
"We have sophisticated markets in Australia and New Zealand and we think it's time for an ECN to provide some price, technology and innovation competition."
He said the ECN was on track to start trading within six months.
His team was working with the Australian Government and the Australian Investment and Securities Commission on obtaining a licence.
"Once we get through that we'll be able to firm up a launch time."
The ECN is hoping for a change to the Australian rule requiring off-market trades to be reported to the ASX. Weldon has said the ECN would prefer not to report its trades to its competitor.
The NZX share price rose 15c to $7.25 yesterday.
Greg Yanco
* Age 48.
* Bachelor of Business.
* CPA (Certified Practising Accountant).
* MSDIA (Master Stockbroker, Securities and Derivatives Industry Association).
Career
* New South Wales Corporate Affairs Commission - stockbroker licensing and investigations.
* ASX - Manager of various teams within ASX's regulatory and commercial environments.
