Liquidnet has extended the reach of its VWAP Cross functionality to include the Singaporean market.
VWAP Cross is designed to allow Liquidnet clients to cross block size orders at the full day VWAP price prior to market open in a bid to reduce market impact and improve VWAP performance. It’s average trade size for Asia Pacific in 2023 was $1.57 million.
Singapore is the fifth market where VWAP Cross will become available, alongside Australia, Hong Kong, Japan and Indonesia which was added most recently in Q4 last year.
Tristan Baldwin
Thanks to market structure and regulation nuances, VWAP use for execution is the most prevalent in Asia where it accounts for almost 50% of the underlying assets in some markets.
Asian markets are some of the most lit markets in the world, Liquidnet’s head of equities for Asia Pacific, Tristan Baldwin, told The TRADE, and expanding the VWAP Cross is aimed at supporting client demand for minimised impact amid this market structure.
“The majority of liquidity is found on the lit exchanges. There aren’t pan-Asia regulations, so markets differ in terms of their access to dark liquidity etc.,” Baldwin said, speaking to The TRADE.
“VWAP is a very good benchmark to be able to understand how you’re tracking across the day and where to access that liquidity, especially given that the majority of liquidity is accessed on exchanges. If the majority of the liquidity is on the lit exchange then the sourcing of it takes a different form in comparison with other regions that have a more complex venue market construction.”
VWAP Cross is rolling out on a market-by-market basis to ensure it meets individual market’s regional regulatory requirements. It aims to bridge its five markets and reduce market impact by leveraging a pre-market matching session.
“Unlike with our previous traded price iterations we were able to come up with a process in the product that essentially fulfils VWAP needs using a pre-market matching session. Clients can submit their liquidity in the normal way that they do to Liquidnet and then be exposed for a match between a buyer and a seller,” added Baldwin.
“We’ve designed our product to engage with clients whilst knowing once that pre-market window closes clients can get on with the rest of the day. It came to us from a lot of client consultation.”
Roland de Marsangy
Speaking to The TRADE, head of business development for APAC at Liquidnet, Roland de Marsangy, said the firm would likely start exploring adding Taiwan or Korea to the VWAP Cross universe in the near future.
“Client demand is a big driver of what we do but also the regulation and the printing mechanism that are usually different in each market. The end game is to release it on as many markets as we can,” said de Marsangy.
Liquidnet developed the VWAP Cross product following extensive buy-side consultation and the product is set to develop further in the not-too-distant future, Marsangy confirmed.
“We do have a lot of our members providing liquidity into the VWAP session in the pre-market session. These guys don’t all have exactly the same instructions or trading objectives for the rest of the day so it’s all about how we link that liquidity,” he explained.
“The next step that’s the most realistic in the near term is having a PM session as a full day session. We have the vast majority of the markets in the region with the lunch break so that would be a natural second step. There isn’t much in the VWAP session to match the objective for the rest of the day.”