Outgoing Securities & Futures Commission (SFC) chief executive Martin Wheatley has said that allowing alternative trading venues to compete with exchanges delivers some benefits to investors but invariably leads to a more fragmented market.
Speaking at a TradeTech Conference in Hong Kong yesterday, Wheatley stated that the benefits of having additional trading platforms included more competitive pricing, more innovative services and an improvement in the quality of services.
It is an argument that brokers and dark-pool providers have been making increasingly loudly in Hong Kong, where transaction costs are regarded as high.
"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 yesterday.
Wheatley himself has been a prominent critic of the rise in high-frequency trading. But yesterday he stressed that regulators and market traders should work together to identify appropriate solutions to new regulatory issues that accompany increasing competition.
"The SFC welcomes competition as long as investors' interests are not compromised and the market continues to be fair, efficient and has its integrity intact," he added.
He pointed out that Asian markets have the benefit of last-mover advantage, learning from mistakes made in the US and Europe when it comes to adopting more sophisticated trading practices in the course of market development.
At the same time he stressed the importance of embracing healthy competition in the trading arena. "Competition will bring in new types of market participants and trading behaviours which may challenge the status quo," he noted. "Regulators, therefore, need to maintain a regular dialogue with the industry to obtain market intelligence on potential issues."
Wheatley is in his second term as CEO but is poised to step down in June, when he will have worked at the commission for six years. He joined in June 2005 and was appointed CEO the following year.
In February, Hong Kong’s financial market regulator announced it had reappointed Alexa Lam as deputy chief executive officer and executive director of policy, China and investment products. The extension of Lam’s contract for three years from the start of this month was welcomed for the continuity it offers following Wheatley's surprise announcement.
The Hong Kong government has since been engaged in a recruitment process for the role of SFC chief, although an announcement has not yet been made about a successor. Lam herself had been touted as a possible successor, but at least for now she will continue to focus on cultivating closer collaboration with counterparts in mainland China.