Investment bank Nomura has opened up its NX crossing network in Hong Kong by signing a reciprocal liquidity agreement with agency broker Instinet.
Instinet will have the capability of routing orders to Nomura's NX crossing network in Hong Kong, and Nomura's clients will be able to access Instinet's CBX liquidity pool in Hong Kong which functions as a dark trading venue. Nomura already routes to CBX in Japan, which offers both lit and dark functionality.
This is the latest in a series of such arrangements that are becoming increasingly common in Asia. Aggregation of liquidity between dark pools is seen as one route to tackling the region's fragmented markets and low volumes.
Instinet is the first external broker to connect to NX Hong Kong. Robert Laible, Nomura's global co-head of electronic trading sales and head of program sales for Asia, said the agreement with Instinet is an important step in improving the liquidity available in NX Hong Kong.
“This is the first time we've opened up NX Hong Kong to other sources of liquidity, which will increase the crossing rate and further the opportunity for price improvement for our clients,” Laible said. “I expect we will see further liquidity aggregation amongst brokers in Asia to meet the increasing needs of clients.”
Instinet will connect to NX via its dark liquidity seeking algorithm, Nighthawk. The logic used in Nighthawk is embedded in all strategies in Instinet's global Execution Experts algorithmic trading suite, which was rolled out in Asia on 2 November.
The broker has now linked CBX to 12 Asian markets including those of fellow agency brokers such as ITG's POSIT dark pool in Hong Kong and Australia on 11 November and Tora's TORA Crosspoint in Japan on 15 September.
Nomura went live with NX in Hong Kong in June 2010, after launching in Japan and the US in late 2009. In January 2010, it reclassified NX as a multilateral trading facility dark pool in Europe.
After NX crosses orders, it automatically reports the trades to the Hong Kong Stock Exchange. According to Nomura, orders placed in NX are not displayed externally or internally, allowing participants to place orders without revealing information, thereby minimising market impact.