Agency broker and technology provider ITG has launched a dark liquidity aggregation tool for the Asian market to counter buy-side concerns about fragmentation.
POSIT Marketplace will enable buy-side institutions to cross against liquidity from multiple Asian dark pools at the same time as order flow from POSIT, ITG’s established buy-side-focused crossing network.
“Asia’s traders are willing to seek liquidity in dark venues but they have seen the issues that fragmentation has brought in Europe and the US,” Michael Corcoran, ITG’s head of sales and trading, Asia-Pacific, told theTRADEnews.com. “Before fragmentation becomes an issue here too, clients are looking for a tool that gives them easy access to multiple dark venues – and that’s exactly what POSIT Marketplace does.”
ITG launched similar services in the US and Europe in 2009. The firm claims that the US version of ITG Marketplace delivered savings averaging 11.5 basis points across all market caps in the third quarter of 2009 and suggests savings could be more significant in Asia due to the region’s higher trading costs.
In Asia, POSIT Marketplace will initially consolidate dark liquidity from brokers’ dark pools in Hong Kong-listed stocks. “We’re starting by connecting to brokers’ dark pools, but will engage with exchange-backed offerings as they emerge,” said Corcoran. “We’re looking for partners that share our aim of understanding the needs of the client base and delivering institutional liquidity.” ITG expects to extend the service to Australia during the second quarter of 2009, before opening up in Japan.
Although – unlike Europe and the US – displayed liquidity remains consolidated on the primary exchanges of Asia’s major financial centres, dark liquidity is spread across a broad band of providers. Brokers with internal crossing networks in Asia include BNP Paribas, Citi, Credit Suisse, Goldman Sachs, Instinet, Merrill Lynch, Morgan Stanley, Nomura and UBS. Other sources of dark liquidity in Asia include BlocSec, a unit of CLSA, and buy-side crossing network Liquidnet, which offers liquidity in stocks listed in Australia, Hong Kong, Japan, Singapore and South Korea. At present, the only officially announced exchange-backed dark pool is Chi-East, a joint venture between Chi-X Global and the Singapore Exchange, which is scheduled to launch in Q2 2009.
ITG said POSIT Marketplace would reduce trading costs for buy-side firms in Asia by minimising spreads (via mid-point crossing or better), market impact (via pre-trade anonymity) and delay costs (via liquidity aggregation).