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John Kelly, Liquidnet

Liquidnet Inc – Best North American Trading Venue

New York-headquartered Liquidnet is a global institutional trading network that connects buy-side institutions to global equity markets. As such it supports the primary need of institutions: to buy or sell large blocks of stock in a secure, anonymous fashion with minimum price movement. Today, Liquidnet connects more than 700 of the world’s top asset managers to execute their business across 42 markets spanning five continents.

With US and European equity markets performing strongly in 2013, the flow of funds into off-exchange venues like Liquidnet is rising as institutions take on higher conviction.

“There are more funds flowing into equities generally, and a significant proportion of that is going international. That’s an ideal situation for a firm like ours which has one of the largest and strongest international institutional trading networks designed for the buy-side. The numbers we reported for Q1 2013 are testament to this,” says John Kelly, Chief Operating Officer.

In Europe, total principal traded was over USD22.6billion in Q1. That’s a 64.7 per cent increase on Q4’12. In Asia, overall principal traded exceeded USD5billion for the first time, marking a 20 per cent increase over last quarter. In the US, average daily volume was up by 25 per cent over last quarter, averaging 44 million shares per trade.

The benefit of trading anonymously means institutions can prevent the market from moving against them. This is evidenced by the fact that even though year-on-year trading volume in European equities is down 7.5 per cent for Q1, for the same period Liquidnet has seen its trade volume climb 35 per cent.

“Our model is built for the largest scale investors who trade in blocks that generally reflects market conviction. Just recently in London, on a single day, we facilitated trades between two Members that totalled USD176million in one name; we’re the largest block trading venue in the world and the average trade in dollar value, in every market we operate in, is about USD1million, which translates to 40-45,000 shares.

“There’s no other trading venue in the world that could support block trades that big. We also make trading globally easy. We recently had a USD20million cross in Turkey, which is a new market for us and by comparison, a much thinner market to the UK or US. So in good markets or bad, developed or emerging, buy-side institutions come to us because this is where they can access the liquidity that they need to get their large trades done,” explains Kelly.

The Philippines and Turkey were added to Liquidnet last year, and this year has already seen the addition of Thailand as the firm continues to broaden out its global network.

As well as meeting the block liquidity needs of its members, Liquidnet has developed a commission management solution, which for most institutions is the second major issue they face.

“What we find is that increasingly with hedge funds, they require a great deal of information and research to feed their ideas. We are doing a number of things to allow our members to simultaneously get the best execution for block trades, and provide the tools for them to be able to pay their bills across a wide range of service providers, be they boutique or full-service firms.

“The ability to execute and provide commission management at the same time is a very compelling proposition,” adds Kelly.

On winning the award this year, Kelly comments: “Our mission is to make global markets more efficient in order to drive investment performance for the world’s leading institutional investors through our global network. This award reinforces the unique value we deliver in the market.”

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