This paper analyses the introduction of competition to the Australian equities market with the entry of the Chi-X marketplace.
We analyse the impact it has on market quality and provide evidence that market efficiency, as proxied by transaction costs and price discovery, is improved in the wake of competition. We also argue that the market surveillance changes that accompanied the introduction of competition maintained market integrity, allowing us to conclude that the introduction of competition to the Australian equity market has enhanced market quality. We estimate the welfare affects to be between $36-220m to market participants in the first year alone.
