In a market where block trading is prevalent, buy-side trading network Liquidnet has experienced record volumes, while the national exchange’s own block trading venue falters.
Last month, Liquidnet’s Australian operations set a new record, trading close to A$1 billion in member trades. The record comes as Liquidnet completes its fourth year of operation in the country.
Yet the Australian Stock Exchange (ASX) last month disclosed its own block trading venue – VolumeMatch – had been “unsuccessful” and its design and distribution model was now under review. VolumeMatch has a minimum order size of A$1 million.
In February, Liquidnet said it had one of its largest-ever liquidity pools, averaging A$2.2 billion per day, representing the positions of 108 unique liquidity providers looking to move large blocks of Australian listed securities.
A large proportion of Australian investments are contained in the nation’s mandatory pension and superannuation funds, making block trading popular in the market.
“For the last four years, we have been providing leading asset management firms around the world and in Australia with a way to trade their large blocks on a different scale by safely sourcing wholesale volumes of liquidity,” said Sam Macqueen, head of Liquidnet Australia. “As our network of institutions who trade Australian equities continues to grow and the liquidity they contribute increases, we continue to see our pool and match probabilities grow exponentially year after year.”
The average trade size on Liquidnet’s venue during the month was A$1.5 million, in contrast to the average trade size on the ASX in February of A$7,581. Liquidnet Australia’s network includes 48 domestic asset management firms that are live and trading on the system.
“The large fund managers and superannuation funds that make up our network are longer-term focused and highly protective of their alpha generation capabilities across the entire investment process,” said Macqueen. “As we continue to see an increase in high-frequency trading, these investors see value in being able to transact large volumes of liquidity among each-other in a protected environment that guards them safely from information leakage and market impact, both of which can significantly erode returns for their clients.”
Chi-X Australia, a Chi-X Global platform that launched to challenge the ASX in October last year, lost market share in February, accounting for 0.53% of turnover in the country’s stock turnover, compared to 0.86% in January.