ASX chairman Rick Holliday-Smith says the equity market operator has responded well to the arrival of competitor Chi-X, but notes a deterioration in the quality of the local market.

Mr Holliday-Smith says the ASX has cut fees, introduced new products and made investments in its businesses.

However, he believes the touted benefits of competition with the arrival of Chi-X in Australia in October 2011 have not yet been realised.

“While ASX has responded well to the new market structure, it is not clear that Australia’s financial markets and economy have benefited from the change,” Mr Holliday-Smith told shareholders at the ASX annual general meeting on Friday.

“There are also signs that the quality of Australia’s equity market is deteriorating as a result of growth in high frequency trading and so called dark execution.

“This should be of significant concern to retail investors, fund managers and the superannuation sector.”

Meanwhile, ASX chief executive Elmer Funke Kupper said trading levels were subdued so far in 2012/13.

Figures presented at the AGM showed activity levels in the cash equities market for the first three months of the current financial year were below the prior corresponding period.

It was a similar story on the ASX24 derivatives market, Mr Funke Kupper said, apart from September, where activity levels were up 22 per cent compared with the same month a year ago.

“Current activity levels are subject to the continued global economic uncertainty and a moderate softening of economic growth in Australia and the Asian region,” Mr Funke Kupper told shareholders.

Total capital raised in the first quarter of 2012/13 was $10.9 billion, Mr Funke Kupper said, up 12 per cent from $9.7 billion in the prior corresponding period.

Shareholders overwhelmingly approved ASX’s remuneration report, and supported resolutions awarding performance rights to Mr Funke Kupper.

ASX shares closed 23 cents lower at $29.86.