Many will tell you how expensive Sydney is. You should not be surprised to find products and services with a 100% markup compared to other developed countries. If you think $3.40 is too much to go from one train station in the Sydney metro area, then keep in mind that each train journey is subsidised by the the government to the tune of $6 to $7. I.e. the true cost for hopping a single train station is nearly $10.

It did not come as a surprise when a mid range stockbroking agency, a client of ours, told us how the going was tough. Their estimate of a barebones software and hardware spend for ASX and Chi-X was well above $50,000 per month. This is just an opex cost, and exlcudes any manual overheads and staffing costs. 

With plummeting volumes, how can a lot of smaller stock broking shops compete and survive on their own? Specially, without investing even more in HFT and Algo trading platforms. Perhaps, unless the market becomes a lot more competitive, this cost base will not drastically reduce.

When we introduced our ASIC-CONNECT short sell disclosure service, there was a lot of surprise as to the low pricing of the software. However, we believed that with smart use of cloud infrastructure and applying lean product development principles, we could offer a service at a very attractive cost base without compromising the quality.

Likewise, without disruptive innovation in technology and pricing, the vendor side pressure on the broking industry will remain. In absence of that, a continuing competition for market venue share should put downward pressure on broking costs, unless ASX and Chi-X form what Coles and Woolworths have done: a duopoly with phony competition.