There is a growing desire for trading off-exchange among buy-side traders in Asia’s key markets, according to Cameron Field, managing director, Asia Pacific, at trading technology firm Charles River Development.
“We anticipate continued growing demand among our Asian client base for crossing networks and low-touch alternative execution venues,” Field told theTRADEnews.com. “We see Japan, Korea and Hong Kong as the three markets with the strongest demand, closely followed by Australia.”
The firm recently announced that its Charles River Investment Management System (IMS) had connected to agency broker Instinet’s three Asian crossing networks – KoreaCross, JapanCrossing and CBX Japan. “The Asian trading environment poses unique liquidity and connectivity challenges to our clients wishing to trade large blocks of Asian equities with little market impact,” said Field. “Partnering with providers such as Instinet gives our mutual clients a seamless, integrated solution that addresses these challenges.”
Although crossing networks are particularly attractive to institutional investors in Asia, due to reduced risk of information leakage compared to retail-influenced public markets, demand has been also influenced by events outside Asia. “Our buy-side clients are always looking for new ways to achieve best execution and minimise market impact,” said Field. “Clients in Asia-Pacific have been watching with interest the proliferation of crossing networks in the US and UK, and want to understand the benefits of these services to their business.”
Accordingly, Instinet has seen trading volumes on its three Asian crossing networks grow significantly. The firm reported 266% annual growth in traded value on its JapanCrossing in 2007. A spokesman said the firm has also seen encouraging growth in KoreaCross since its launch in March.
“Our clients have been very receptive to the idea of a completely anonymous venue for trading Korean equities – a market where the costs of trading due to information leakage are so high that many clients don’t trade nearly the volumes they’d like,” the spokesman said. “As the platform becomes accessible by more and more institutional traders through access agreements with firms like Charles River, Tora Trading and Fidessa, we expect to see KoreaCross continue to grow.”
Charles Rivers’ Field said the firm would make ongoing enhancements to its offerings to account for the impact of crossing networks – such as differing levels of fragmentation and displayed liquidity – across Asia’s equities markets. “We expect these countries will have high relative demand and so we’re preparing now to ensure our clients are ready,” Field said.