ASX Group, the company that operates the Australian Securities Exchange (ASX), has approved an application by Chi-X Australia to use its clearing and settlement service, the trade acceptance service (TAS).

Chi-X has signed up for a five-year term, which means the company has to pay $10,000 as an initial application fee plus $275,000 a year in service fees.

Chi-X, which is set to become the first competitor of ASX Group later this year, is required to have clearing and settlement arrangements in place that are approved by the Financial Services and Superannuation Minister before it can begin operating alternative trade execution venues.

ASX developed the system for potential new market operators in preparation for competition for market services in Australia, and it has been ready to operate since October 2010.

"The annual fee for the service has been set to partially recover the costs incurred by ASX in developing and operating this new service," the company said.

"In the event that three or more market operators were to use the TAS, ASX will reduce the annual service fees for each market operator consistent with ASX's cost recovery objectives."

The system enables trades in securities that are eligible for ASX's CHESS system - a system which facilitates the settlement and clearing of trades in shares and provides an electronic sub-register for shares in ASX-listed companies - on any licensed trading platform.

It will execute transactions identically to trades executed on ASX's own cash equity market.