Chi-East, the pan-Asian joint venture dark pool between Singapore Exchange (SGX) and exchange operator Chi-X Global, announced a 203% increase to US$71.06 million in Q3 2011 from US$23.45 million in Q2 in the value of trades matched.
Chi-East saw US$4.96 billion routed through its platform in Q3, up from US$3.41 billion in the previous quarter. The platform has also provided investors with an average price improvement (defined as the difference between the best bid or offer on the security’s primary exchange and the Chi-East execution price) of 11.86 basis points since its launch in November 2011.
Ned Phillips, CEO of Chi-East, said, “The increase in the number of participants and consequent rise in liquidity has driven the growth that we've seen. Just as we start to get more liquidity, as more of the algorithms and smart order routers and dark pools start to get more executions, it becomes self-fulfilling. So it's not so much driven by the market volatility, but as more people see the liquidity increasing, the momentum builds by itself.”
Chi-East recently added three broker-dealers, namely ITG, J.P. Morgan and The Royal Bank of Scotland, to its trading platform, bringing the total number of participating broker-dealers to eight. “We are encouraged to see more brokers electing to use the platform to access aggregated regional trading flows. We look forward to adding more sell-side participants as we further ramp-up activity,” said Phillips.
Total market activity in Asia-Pacific was US$1.80 trillion in August, building on an upward trend beginning in June (US$1.4 trillion) and continuing in July (US$1.6 trillion).
“For new platforms, the orders matched to the orders routed is always low to begin with, and that will increase over time. As you get more participants and different types of flow, you see an increase in matching,” noted Phillips.
This is the first time that Chi-East has announced volume data. It has not made available Q1 data. “For any dark pool, the first six months is really a testing period. People take a little bit of time to see that things are running smoothly. So Q2 and Q3 figures are the relevant figures to show,” Phillips added.
Launched in October 2010, Chi-East supports trading in 3,264 securities, including all SGX-listed shares, all Hong Kong main board listed shares, the component stocks of Japan's TOPIX 100 and all listed exchange-traded funds in the three markets. Brokers Instinet, Deutsche Bank, Morgan Stanley, Nomura and UBS all participated on Chi-East from launch. Chi-East has chosen data centre provider Equinix's Singapore 2 International Business Exchange as its primary data centre.
The latest data from Chi-East will be a positive signal for Chi-X Australia that is expected to launch at the end of October. The venue first revealed its intention to launch in February 2008, but has been held up by a series of delays, largely caused by regulatory change required to facilitate the formation of alternative venues in the Australian market.
Dark pools and alternative trading platforms have reported robust volumes in Asia in recent months. Second-quarter volumes crossed in ITG's POSIT Marketplace in Asia Pacific were around three times the level of Q1, with average price improvement of 13 bps per trade year to date. Japan's proprietary trading systems (PTSs) reported greater volumes and market share in August, with Chi-X Japan accounting for 2.31% of trading, up from 2.06% in July. SBI Japannext managed 2.27% in August, from 2.08% in July. Notwithstanding, Kabu.com decided to pull the plug on its service last month, citing the Tokyo Stock Exchange's introduction of the arrowhead platform in January 2010 as a reason for its failure to gain market share.
Author: Jill Wong