In a bid to alleviate the challenges and expense of trading equities in Korea’s highly-transparent ID market, two brokerages have teamed up to launch a crossing network for Korean equities.
Agency broker Instinet has joined forces with Korean investment bank Samsung Securities to create KoreaCross, which Instinet claims will allow domestic and foreign institutional investors to trade blocks of Korean equities at VWAP anonymously, and with little or no market impact. The new crossing network is scheduled to go live on 7 April. It has been approved by the Korean Exchange (KRX) and Korea’s Ministry of Finance and Economy (MOFE).
KoreaCross will operate as a daily, pre-market VWAP cross, matching buyers and sellers at 08.30 local time for that day’s primary market VWAP. It will allow for short sells, and the system will aggregate order flow to allow clients to meet the Korean market’s KRW 100 million ($102,140) minimum order size requirement. “The ability to aggregate flow enables an investor with an odd lot order to participate, which they couldn’t otherwise,” explains Christian Chan, head of electronic trading for Instinet Asia.
Traders will be able to access KoreaCross through the Instinet Newport execution management system, through one of several third-party trading systems, or through a direct FIX Protocol connection.
Instinet has created the new crossing network in response to customer demand. “Given that Korea can be a difficult and expensive market in which to operate, due to its relative lack of anonymity, our clients that regularly trade Asia have increasingly been looking for us to build upon the success of JapanCrossing with a Korean platform,” Chan told theTRADEnews.com.
He adds, “The Asian markets are still somewhat behind the US and European markets in terms of sophistication, but are rapidly catching up. Consequently clients are demanding the same tools and platforms be offered, which is why we’ve introduced KoreaCross.”
KoreaCross is wholly-owned by Instinet. Samsung securities will act as the local broker sponsor and provide clearing and settlement services, as well as domestic order flow. “The key was finding a local partner with enough order flow to match up against, and we feel we’ve found that in Samsung,” says Chan. “As a top-five broker in Korea, Samsung brings not only a tremendous amount of local liquidity, but also relationships with all of the big local institutional players, which is extremely
important for a crossing platform like this.”
The partnership with Samsung also helped with the regulatory approval process. “With KoreaCross, Samsung handled this component and the process was actually quite simple given Samsung’s local expertise and long-standing relationship with the Korean regulatory groups KRX and MOFE,” says Chan.
KoreaCross will become Instinet’s third alternative trading system (ATS) in the Asia-Pacific region and its ninth worldwide. It operates two crossing networks in Japan: JapanCrossing, a three-times-daily network, and CBX Japan, a real-time matching platform. Chan is reluctant to say which other Asian markets Instinet is targeting with its ATS model, but he adds, “We are continually consulting with our clients to determine where demand exists for us to broaden our portfolio. Asia is a region where our clients are quite keen for us to expand.”