Equity block trading venue Liquidnet has launched in Malaysia and plans to open in Indonesia very soon, following record growth in its Asia-Pacific business this year.
Active in the region since November 2007, Liquidnet launched with Hong Kong, Singaporean, Korean and Japanese stocks, adding Australian equities in February 2008 and New Zealand equities in June 2010. The firm went live in Malaysia on 29 November 2010. This year, the firm had traded US$11.4 billion in Asia-Pacific as of 1 November 2010, according to its own figures, already higher than the US$10.2 billion reported for the whole of 2009.
With the addition of
Malaysia, Liquidnet now offers trading access to 38 equities markets (plus London and Luxembourg listed global depository receipts) around the world. According to Lee Porter, head of Asia-Pacific, Liquidnet, the arrival of the block venue should not be seen as a threat to the incumbent exchange. “We always meet the exchanges and regulators and explain what we do. We feel we augment the exchange – we're certainly not in competition,” he said. In his view, the main benefit Liquidnet offers Indonesia and Malaysia is a solution for institutional investors with large positions, who would otherwise struggle to find sufficient liquidity to enable them to trade without excessive market impact.
“We bring liquidity and increased volume to the exchanges, typically from overseas institutions they wouldn't normally see,” he said, adding that Liquidnet is particularly valuable in smaller markets with limited existing liquidity.
Pointing out that the average on-exchange execution in Asia is about US$10,000, Porter suggests that liquidity and demand are flowing back into the region as average execution size edges up and volatility decreases. Bigger orders provide evidence that more traders are feeling secure and happy to trade in blocks, following a summer of low volumes in Asia. Porter adds that Liquidnet is seeing a record US$9 billion a day in potential liquidity and its average trade size across all markets is US$1.3 million. “Emerging markets, such as Malaysia, represent considerable growth opportunities and are therefore increasingly important for portfolio managers looking to boost the performance of their investments,” said Porter. “We expect the launch of Indonesian equities trading to follow very soon.”