Agency brokers ITG and Instinet have agreed a reciprocal arrangement that will permit clients to search for liquidity in each other's Asian crossing networks.
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 ITG's POSIT dark pool in Hong Kong and Australia. ITG clients will access CBX, Instinet's liquidity pool which offers dark functionality in Hong Kong and both lit and dark in Japan, through POSIT Marketplace, ITG's dark liquidity aggregation tool. Introduced into Asia via its Hong Kong launch, POSIT Marketplace was expanded into Australia last month. In October, Instinet signed a similar reciprocal liquidity access deal for Japanese equities with TORA Crosspoint, a liquidity aggregation and matching service operated by agency broker and trading technology provider Tora.
Glenn Lesko, CEO, Instinet Asia, predicted that client demand would encourage large investment banks to join agency brokers in embracing liquidity aggregation in Asia. “Bulge-bracket firms will eventually have to come around or they will miss out on liquidity. Buy-side clients want simplified workflow,” he told theTRADEnews.com at the TradeTech Asia 2010, a trading conference held in Singapore. Instinet clients can now access 11 alternative liquidity pools in Asia.
Michael Corcoran, ITG's head of sales and trading, Asia Pacific, said the development of multiple aggregation channels in Asia would enhance clients' ability to source liquidity. “Clients' reasons for trading with a particular broker change from day to day, but they still need to represent their orders in as many pools as possible. These new tools are challenging the existing mindset,” he said. Corcoran added that aggregation of off-exchange liquidity was increasing the need for strong post-trade analytics to monitor execution performance and pointed out that clients can opt out of directing flow to a particular dark pool. “Accessing multiple, quality venues from a single point is key to keeping trading costs down in a fragmented market,” he said.
“We've been very aggressive in pursuing these kinds of linkages in Asia, as our goal is helping our clients get ahead of the fragmentation curve in Asia,” said Joel Hurewitz, head of Asia-Pacific sales – broker dealer and liquidity, Instinet.
Although it is an algorithm in its own right, Nighthawk's liquidity-seeking logic is embedded in all of the strategies in Instinet's Execution Experts algorithmic suite, recently launched in Asia.