Fellow agency brokers and trading technology providers Instinet and Tora have reached a reciprocal agreement that will allow clients in Japan to access their respective liquidity pools.
The new deal means that Instinet Japan clients will be able to access TORA Crosspoint, a liquidity aggregation and matching service, while Tora clients can connect to Instinet CBX ASIA, the firm's displayed liquidity pool, in Japan. The two companies both plan to link to other liquidity pools in the region and extend their own bilateral agreement to other Asian markets over the coming months.
Joel Hurewitz, Instinet's head of Asia-Pacific sales – broker-dealer and liquidity, predicted that similar agreements would become more prevalent as the Asian markets continue to fragment. “In the last 10 months I’ve had reciprocal liquidity conversations with every broker in Asia that has a pool of liquidity in the region,” he said.
Instinet plans to connect to several other pools in Asia by the end of the year. “We have reached the stage of checking documentation and connecting systems with other pools. We expect to have five connections made by the end of October. As the number of liquidity destinations in Asia grows, the buy-side will demand solutions that can optimise the benefits of the disparate liquidity while at the same time limiting the risk of access,” he said.
Tora chief operations officer Ian Lombard said liquidity access and execution quality are the key challenges facing the buy-side in Asia. “The simple fact is that the buy-side doesn't have the resources – or desire – to sift through venues and piece liquidity together themselves,” he said.
According to Lombard, Tora intends to expand Crosspoint's connectivity further in the near term to provide an aggregated position for clients. “We connect to two broker crossing pools, Credit Suisse and Instinet, and two proprietary trading systems, Japannext and Kabu. We're adding Chi-X Japan and will announce three more brokers in the next couple of weeks,” he said.
Instinet clients will use the firm's Nighthawk liquidity aggregation algorithm – which allows a single order to access multiple non-displayed trading venues and includes venue analysis and anti-gaming logic – to access TORA Crosspoint. Tora's smart order routing technology will connect to Instinet's CBX ASIA in Japan.