Liquidnet adds pre-market liquidity to Asia Pacific VWAP offering to minimise buy-side impact

Speaking to The TRADE, Liquidnet’s APAC head of equities and global head of equity product says the new pre-market block liquidity will allow firms to engage with liquidity without trading throughout the day.

Liquidnet has expanded its VWAP trading offering with the launch of a new cross trading capability aimed at reducing buy-side firms’ market impact, The TRADE can reveal.

Named VWAP Cross, the new product allows firms to engage with pre-market block liquidity at the full day VWAP price, building upon its existing VWAP intra-day block trading product, Smart Blocks.

“We’ve got a lot of liquidity that sits in the market before it gets filtered down and starts working into the market,” Rob Cranston, global head of equity product at Liquidnet, told The TRADE. “The opportunity to engage with that liquidity and find large blocks of it can minimise market impact and stop firms having to trade through the market all day which gives firms a huge opportunity.”

With market volumes currently down by as much as 45% on any given day in APAC due to adverse market conditions, the new capability will offer firms another liquidity option to ensure they can execute on their investment strategies, added Liquidnet’s head of equities for the Asia Pacific region Tristan Baldwin, speaking to The TRADE.

“In low volume market conditions having as many different options to seek liquidity is essential. This is all done within the Liquidnet pool which is safe, anonymous, secure and policed,” he said.

The new product can be accessed either via Liquidnet’s front end or the trading desk regardless of Asia Pacific trader workflow. It also includes a break clause which Cranston and Baldwin said was designed to offer buy-side firms “surety” of a good outcome regardless of whether the prices moves throughout the day.

The largest print so far has been $23 million each side in Hong Kong and the average execution size is $2.8 million.

“We’re seeing significant size being able to go through this, whereas a lot of the VWAP cross mechanisms we see globally tend to have quite small clips and sizes as they’re focused on the more algorithmic short duration executions that come out of a VWAP algorithmic strategy,” said Cranston.