A new ‘dark’ block crossing network is set to launch in three Asian countries in May, with more locations to follow later in the year.
BlocSec, owned by pan-Asian agency broker CLSA, will launch in Singapore and Japan on 15 May, and in Hong Kong on 22 May. Korea and Australia will be added later in the year.
BlocSec will be a continuous crossing network for block trades of more than $1 million in size. It will also offer continuous VWAP crossing. The platform will be accessible through clients’ order management systems, Bloomberg, and a web-based front end, and will be open to both the buy-side and sell-side. BlocSec will be run as a separate company, but will be 100%-owned by CLSA.
The new venture will be pitting itself against other crossing networks in the region, such as Liquidnet and ITG’s POSIT. Ned Phillips, CEO of BlocSec, believes the new network has a number of features that sets it apart from its rivals. The first is that it is open to both brokers and asset managers. “BlocSec is unique in that we’re the first crossing network in Asia that will be open to the buy-side and sell-side,” says Philips. “We believe we will have a big community out there.”
Phillips also contends BlocSec also offers a wider array of trading options than rival platforms. “Most of the crossing networks are offering crossing at the midpoint only. With BlocSec, you can cross at what we call passive midpoint aggressive,” says Phillips. “With this, you can sit on the bid or the offer, trade at midpoint, or cross the spread to get the trade done, or you can trade at VWAP as well.”
Another important feature, according to Phillips, is the access to liquidity thanks to its ties with CLSA. Many of CLSA’s clients are connected to the bank via FIX, and will be able to connect to BlocSec using these existing FIX links. “The liquidity pool we have with the backing of CLSA means we have unrivalled access to clients compared to a start-up or a new broker here in Asia, which would have to set up
new accounts and connectivity,” says Phillips. He stresses, however, that although CLSA can send orders to BlocSec, the CLSA trading desk does not get to see any of the order flow. “There are Chinese walls between the two firms,” he explains.
Phillips also argues that the $1 million minimum order size, and the non-negotiated nature of the BlocSec pool help distinguish it from its rivals.
He also claims BlocSec is a truly dark pool. “We don’t show anybody whether it’s a buy or a sell trade, we don’t show anybody what the price is, we don’t show anybody the volume each client has posted. No information is leaked so that means no market impact,” says Phillips. “The other thing is that with a negotiated pool, you have the possibility of more information leakage than in a dark pool like BlocSec.”