Liquidnet – Best North American trading venue
New York-headquartered Liquidnet is a global institutional trading network that connects buy-side institutions to global equity markets. Its global footprint includes subsidiary offices in key financial markets including London, Tokyo, Hong Kong, Sydney and Toronto.
The firm was founded by Seth Merrin in 2001. Prior to Liquidnet, institutional investors looking to buy or sell a large block of stock had few options. Typically, it meant manually breaking large trades into small pieces and executing on the retail market, where price fluctuations and scarce liquidity were inevitable.
Merrin recognised that institutional investors needed a wholesale market where they could trade blocks of equities with maximum anonymity and price improvement. Liquidnet was established to meet that need.
At inception Liquidnet had 38 US asset managers. Today, confirms John Kelly (pictured), Chief Operating Officer at Liquidnet, it sources liquidity from more than “700 of the world’s leading asset management firms across 39 equity markets”, spanning five continents.
Once the liquidity is secured, Liquidnet delivers it to the institutional investor on their terms – protected, sizeable, anonymous and ready-to-trade.
As a result, Liquidnet has become the leading global institutional trading network for the buy-side community who rely on off-platform liquidity pools to protect against price erosion and take reassurance from having complete anonymity. In the US, Liquidnet’s average execution size is nearly 50,000 shares – ten times larger than any other exchange, dark or lit.
Aside from sourcing liquidity from its 700+ Members, Liquidnet uses a number of supplementary protected channels to deepen the liquidity pool. Says Kelly: “We now source large-scale liquidity from sources including brokers, exchanges, public companies, private companies, and private equity and venture capital firms.”
Clients who use Liquidnet have complete control over how they access liquidity. Across a variety of sources, with robust protections against information leakage, traders can:
• manually negotiate their own order, or
• automate the execution using a suite of customisable algorithms, or
• work with Liquidnet’s in-house team of traders who can trade on their behalf.
“Our growth over the past 11 years has clearly been both an endorsement of our unique business model and recognition that the equities market needed to be two-tiered: one for retail; one for institutions,” comments Kelly.
Last year saw solid global growth for the firm, particularly in Asia. “We experienced rapid growth in Asia-Pacific during 2011 driven by a rapidly growing Member base in the region and a surge in trading activity and large demand for trading of Indonesian equities.
“Liquidnet’s growth was also marked by new partnerships and the expansion of other businesses. For example, in July 2011 Liquidnet and SIX Swiss Exchange launched a landmark platform for non-displayed equity block trading. The platform allows SIX Swiss Exchange members to execute large block trades efficiently in Swiss and global equities through Liquidnet’s exclusive global liquidity network.”
2012 has seen the firm develop a series of commission management tools for Members as it strives to eradicate inefficiency for traders and protect the performance of their portfolios. Kelly says that Members had been telling Liquidnet for some time about their hassles of managing commissions and their broker commitments.
“In response, Liquidnet developed an online tool for institutional investors —Liquidnet Select Aggregator—to aggregate, allocate, and track commission payments to brokers in one convenient location, saving time, money, and resources. Liquidnet Select Aggregator is a game changing application that allows firms to seamlessly monitor and manage all CSA, CCA and Soft Dollar Accounts via one simple web application.”
On winning the award Kelly comments: “We are fortunate that the hedge fund community recognises the unique value that Liquidnet delivers to the market
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