Agency broker Instinet has extended its VWAP Cross functionality to Hong Kong and Europe, which it claims will help buy-side traders improve execution performance and better manage fast-moving markets.
VWAP Cross first matches client orders during one or more scheduled pre-market crosses. Matched orders then receive an indicative fill based on the stock’s previous night’s close, but are subsequently re-priced to reflect the day’s VWAP. Trades are reported via the normal channels. The service is already available in the US, Canada, Korea and Japan.
The addition of VWAP Cross to Hong Kong will represent the seventh pool of liquidity Instinet operates in Asia.
“The ability to source block liquidity remains a primary goal of most institutions trading the Asia-Pacific region,” said Glenn Lesko, CEO, Instinet, Asia. “The Hong Kong VWAP Cross adds another important source of liquidity at our most popular trading benchmark.”
The European version of the VWAP Cross will use Instinet’s proprietary European best bid and offer (EBBO) data feed as its reference point and give clients the ability to spread pricing risk over the course of the trading day. The firm’s EBBO feed is in the process of being integrated into its BlockMatch dark multilateral trading facility.
“We were ready to extend the VWAP crossing platform to Europe a few years ago, but market volatility meant the time was never really right to launch it,” Scott Lesser, head of execution services, Instinet Europe, told theTRADEnews.com. “Volatility has dampened since October so we felt the time was right and the demand was there to launch this product in Europe.”
Lesser added that the opportunity to match a significant portion of a parent order at VWAP before the start of trading gives traders the scope to beat the benchmark with the rest of the order throughout the trading day.
“There is a lack of liquidity in the market, so the ability to get some of your order done in a crossing network is a distinct advantage,” he said. “In the VWAP crosses we run in the US, around a third of the executed volume is done as blocks.”
According to data from US boutique brokerage Rosenblatt Securities, the average trade size on Instinet’s US VWAP Cross in January was 1,092 shares, while 33.68% orders were over 10,000 shares in size.
Instinet clients can access VWAP Cross via the firm’s Newport 3 execution management system, through third-party trading systems or via a direct FIX connection.