Trading platform operator Chi-X Global’s plans to establish a joint-venture dark pool in Singapore with the country’s national exchange could be followed by further similar initiatives in the region next year, according to John Lowrey, Chi-X Global’s CEO.
The firm has long held ambitions to expand in the Asia-Pacific region. It announced plans to form Chi-X Australia in February 2008 – although it, along with other would-be entrants, is still awaiting a licence from the Australian Securities and Investments Commission. Chi-X Global has also expressed interest in setting up in other regional centres, including Japan and Hong Kong. Japanese investment bank Nomura, Chi-X Global’s ultimate parent, is keen to see Chi-X operating in Japan.
“All these plans are in motion and things are on track in the other markets, but nothing is scheduled to be started in any of these markets until some time mid-next year,” Lowrey told theTRADEnews.com. “You could see a couple of Chi-Xs popping up pretty quickly.”
However, the new platforms are unlikely to take the same format as the Singapore venture. “I think Singapore will be our one exchange-backed dark pool in the region and the other ones will be lit exchanges for the respective domestic markets,” said Lowrey.
The joint venture pool with the Singapore Exchange (SGX), as well as trading SGX-listed equities, will also trade shares from other Asian markets.
It is not yet clear whether further platforms will be collaborations with local exchanges. “It depends on the market,” said Lowrey.
While the Singapore market is one of the smaller, less liquid equity markets among the major financial centres in the Asia-Pacific region, Chi-X’s would-be competitors in the country have welcomed the new venture. Two independent crossing networks – Liquidnet and BlocSec – are active in Singapore, as are brokers’ internal crossing engines, such as Credit Suisse’s CrossFinder.
Ned Phillips, CEO of BlocSec, contends that the new player could drive more interest in dark pool trading generally in Singapore. “The more people in the Asian market the better,” he said. “From a BlocSec perspective, it is great because [on the day the venture was announced] we had more calls, more orders and more interest than normal.”
He added that the two joint venture partners’ existing standing will attract market participants. “If an unknown player had launched a dark pool in Asia, people would have said, ‘Okay, there’s another dark pool’,” he said. “But this is different because it’s two large, serious players
Greg Henry, head of Liquidnet’s Singapore operations, agreed. “It is always positive to have an exchange-backed dark pool come into the region,” he said. “It really legitimises what Liquidnet has been trying to do in the region, so I think it is very positive for all the investors and institutions in the region. It will help buy-in to the whole ideal.”
While acknowledging that the SGX/Chi-X venture will be a competitor, Phillips said “I think they will take a big slice of the dark pool pie, but I also think they will make the pie bigger. Assuming ourselves and Liquidnet currently have 50% of the market each, I would rather have 33% of a much bigger pie.”