ConvergEx Group, an agency broker and provider of trading technology, has extended its ADR Direct service to Korea and added four new markets to Asian algo suite.
Using ConvergEx’s ADR Direct service, institutional clients can convert underlying stocks listed in a number of foreign markets into American depository receipts (ADRs), denominated in US dollars. ConvergEx was awarded a patent for its ADR conversion technology in September 2010.
Often regarded as a cheap means of securing exposure to emerging and frontier markets, ADRs give investors without global custody relationships a simplified way of investing in markets like Korea and broadens investment opportunities for buy-side firms that only have mandates to invest in US-based securities.
“Korean ADRs are few and far between except for a handful that are offered in London and New York,” Andrew Levine, head of ConvergEx's ADR business, told theTRADEnews.com. “We wanted to offer our ADR service in Korea for some time, but local market nuances meant we were not previously able to offer the service in the way we wanted.”
With ConvergEx’s ADR service, the buy-side can receive guidance from the firm’s US-based desk on factors including available headroom, i.e. foreign stock ownership restrictions, and corporate actions. ConvergEx customers are able to execute conversion trades through any order or execution management system.
Obstacles that the firm needed to overcome to offer Korean ADRs included keeping track of different corporate actions and dealing with underlying instruments that are denominated in a non-deliverable currency.
ConvergEx plans to further extend the Asian markets it offers ADR trading in, with the Philippines the next market to go live by the end of Q1 this year. Taiwanese and Indian ADRs will also be added at some point in 2012. ADR Direct is also currently available for Indonesian and Malaysian markets, as well as in Korea.
The agency broker has also widened its algorithmic coverage to include Malaysia, Indonesia, Thailand and South Korea.
According to ConvergEx, the logic underpinning its algos have been upgraded based on the firm’s proprietary transaction cost analysis engine called PerformEx, which means they can better predict the best location and timing for an order.
“As growth in emerging markets accelerates, we understand how important it is to give our customers the most advanced capabilities for trading in these regions so that they can stay one step ahead of their competition,” said William Capuzzi, president of ConvergEx’s global execution business.