Trading-led Korean investment bank Leading Asia has become a major shareholder in agency broker and commission management platform IND-X. Financial terms of the deal were not disclosed.
The capital and backing of Leading could enable IND-X to become a major commission sharing agreement (CSA) service provider in Asia. CSAs are increasingly used by investment institutions to unbundle payments for research and commission services from brokers.
Although there is no regulatory mandate to unbundle commission and research in Asia, IND-X, which trades for over 50 buy-side firms, claims to have seen demand for its commission management platform grow rapidly since its inception in 2007.
The CSA offering should appeal to international firms that have hubs in Asia, said Peter Twist, chief executive officer at IND-X. “If a US- or UK-based institution is following unbundling guidelines or best execution under Reg NMS or MiFID in its home environment, it can't be seen to be acting outside of those regulations in Asia. Even though there may be no regulatory obligations to source best execution in Hong Kong for example, there is a need to roll out the same policies used by such firms domestically.”
In Japan, there is significant push towards unbundling, according to Twist, who notes that international firms may also require CSAs to source “entrenched, good quality local” research from small local brokers that they would otherwise struggle to work with on the basis of risk.
Twist says that the investment from Leading Asia will open doors without compromising the firm's integrity. “Sometimes you need to have a certain magnitude for the big institutions to trade with you from a risk perspective,” he commented. “It is very important for us, supporting alternative research as we do, to show that we are not being swayed by any of the large investment banks and so while we have Leading as an investor they are not involved in the management of the business.”
Cheul Park, chairman and CEO of Leading, added, “As one of the most international securities houses in Korea, Leading is delighted to be investing in IND-X to help it achieve further rapid growth and complement our existing high quality service to institutional clients in Korea, Japan and Hong Kong. Leading is looking to build a one-stop shop and see an opportunity to enhance IND-X's product offerings in the CSA market which is virtually untapped in Asia.”