Electronic trading revenues are anticipated to fall in the Asia-Pacific region, while the development of dark pools is expected to stall, according to new research from consultancy TABB Group.
In ‘Asian Equity Trading 2009’, TABB predicts that income from electronic trading will slip 16.9% to $815 million this year, from $981 million in 2008. This follows a similar decrease of 17.7% in institutional value traded in the previous 12 months, a drop that affected overall trading strategies in Asia, according to TABB.
“In the second half of 2008, there was a significant pullback leading into the first quarter of 2009,” said Matt Simon, TABB Group analyst and author of the report. “Traders saw liquidity sink.”
The study, which examines institutional trading across Japan, Hong Kong, Korea, Australia, Singapore and Taiwan, estimated that dark pool uptake in Asia-Pacific would take longer to develop than in the US and Europe. TABB predicted that by 2010 3.5% of value traded would be matched off-exchange in Japan and 1.5% in the five other market centres examined. Volatile market conditions have also marked a return to VWAP/TWAP algorithmic trading strategies from buy-side traders in the region, the report added.
Despite the decline in electronic trading revenues, global expansion in the region is expected to continue, driving connectivity to new markets such as Malaysia, Thailand and Indonesia.