TradeTech: New crossing networks need critical mass

New buy-side to buy-side trading venues must adopt a wider ranger of market participants than long-only active managers if they are to succeed, leading figures have warned.

New buy-side to buy-side trading venues must adopt a wider ranger of market participants than long-only active managers if they are to succeed, leading figures have warned. 

Speaking at the TradeTech Conference in Paris, Martin Henning, head of trading at BNY Mellon, said it was important that new initiatives designed to resolve liquidity problems had a multitude of traders with different objectives.
 
He said: “The problem with the buy-side to buy-side concept is that if you are on a momentum play and there are only [long-only] buy-siders in there, where does the liquidity come from? We need brokers to interact.”

Henning’s comments were endorsed by industry heavyweights Adam Toms, chief executive of Instinet Europe and Brian Pomraning, head of electronic client solutions at JP Morgan.
 
Toms said venues need to monitor the liquidity sources in their pools to ensure there was sufficient “uncorrelated liquidity”, while Pomraning said without critical mass venues cannot succeed.
 
Toms explained: “It is very important that you have that uncorrelated liquidity. Turquoise  Block Discovery already has a lot of the answers. But clients and brokers need to get behind that initiative properly. We need to question ourselves about how we operate.

 “I am a bit relaxed about Plato as to why it is any different, when you already have a service in Turquoise Block Discovery. It is pretty independent, in that it is owned by the LSE. Why can’t we make Turquoise Block Discovery our focus?”

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