Liquidnet Europe, a non-displayed multilateral trading facility for European equities, is hoping to counter the expected tough conditions in 2009 by signing up new clients, pushing into new markets and adding new functionality, according to John Barker, managing director of Liquidnet Europe.
“We have got enough in our armoury to stave off what might be a further fall in liquidity,” Barker told theTRADEnews.com.
Trading volumes are largely expected to slump in 2009 as hedge funds and long-only mangers alike rein in their trading activities. This follows trading volume declines in December. Liquidnet’s US operation, for example, posted a 2% drop in total trading volume in December 2008 compared with December 2007, and an 11% decline in average US trading volume. Volume declines were felt throughout the industry. Total European equity trading volumes fell to 122.6 billion shares from 148.6 billion, according to figures from data vendor Thomson Reuters.
The challenging times ahead follow a tough 2008. Liquidnet Europe’s principal traded grew by 24% compared with 2007, having grown annually at levels exceeding 100% in all preceding years. Liquidnet’s total US trading volume increased 28% compared with 2007, and average daily US volume was up 27%.
However, Barker is pleased with the European results given the market conditions and said Liquidnet Europe has a pipeline of buy-side clients signed up to use the platform. “In January, we have already had one of the largest five firms on the planet go live in Europe, he said. “Our aim is to continue to get strategic firms on board and to continue to forge relationships with asset managers in countries where we haven’t had relationships historically.”
Particular areas for growth could be Spain, Greece and Italy, where the firm has only recently started building relationships with buy-side users. “I think there is a real opportunity for Liquidnet to get asset managers signed up and on board by the end of 2009,” said Barker. The company is also looking at pushing into new markets and hopes to add Turkey and Poland to the list by the end of Q1.
Liquidnet is also planning to launch its H2O liquidity pool in Europe which, unlike the main buy-side-only pool, contains flow from non-buy-side sources such as broker-dealers and alternative trading platforms. The company is also planning to introduce a transaction cost analysis service in Europe in a few months’ time. In addition, Liquidnet Europe will continue to build out its Trading Desk, an electronic trading service that uses algorithms to access liquidity both on Liquidnet’s own trading platforms and others.
Nevertheless, the firm is expecting its growth in principal traded to be down on last year’s. Barker predicted that if Europe’s major share indices continue to perform poorly, principal traded may only grow by 2% or 3% in 2009. “But if the major indices in Europe look like they could finish higher than last year, we are hopeful that we can be more than 3% up,” he added.