New York headquartered Liquidnet, the alternative trading platform that enables buy-side institutions to effectively execute large equity orders en bloc, is busy making inroads into the Asia market as its membership continues to grow (over 180 connected). But whilst off-exchange platforms are more accepted in the US and Europe, their presence in Asia is still relatively new, Liquidnet having only been based there since 2007. “At the start there was a lot of uncertainty about what we do and how we do it from buy-side traders, regulators, the media,” explains Lee Porter (pictured), Head of Liquidnet Asia Pacific. “Now, though, we’re becoming part of the furniture. Dark pools are no longer something to be particularly afraid of.” This year, 20 global members have joined the platform, of which 16 are Asia-based.
Nevertheless, off-exchange platforms in Asia are not yet fully embraced. The region’s regulatory environment may be unified but when it comes to competition, everyone has their own agenda. When asked about HKEx Chairman Ronald Arculli’s recent comments that liquidity is being fragmented in the name of low cost and high speed, Porter points out that “We’re a member of the HKEx, what we’re doing is putting together trades that are never likely to get to market. Most are done at the bid-ask mid-point, which translates into real dollar savings for our members.” Liquidnet then, isn’t in competition with exchanges like HKEx, but rather the large broker-dealers, and as such Asian regulations provide no real hindrance. It seems perception is the bigger problem. To date, Japan and Australia have been the most receptive markets to platforms like Liquidnet. Japan has Kabu.com, whilst Chi-X recently went live there and is due to launch in Australia. “The rest of Asia is sitting back and waiting to see what happens, so change is likely to be slow,” says Porter, adding that whilst Asian regulators don’t do things in a kneejerk fashion, “There should be more consistency, which isn’t the case right now. I think convergence and best practices will happen though, eventually.”