How Technology is Altering Asia’s Trading Landscape

The growth of the dark pool space and the rise of electronic crossing platforms are playing an instrumental part in the evolution of Asia’s execution landscape as buyside trading desks look to tap into additional sources of liquidity efficiently and anonymously.

Landscape evolution

Driven by investor demand to access better and more in-depth liquidity, the execution landscape in Asia has undergone significant structural change over the past decade and continues to do so.

The growth of the dark pool space and the rise of electronic crossing platforms are playing an instrumental part in this evolution as buyside trading desks look to tap into additional sources of liquidity efficiently and anonymously.

In Japan, the use of dark pools have now become an essential part of the liquidity sourcing process as investors increasingly look to trade without disclosing their size or their limits.

“Dark pools have been used extensively in the US and Europe for many years, while in Japan the dark framework was only introduced relatively recently,” said Gael Vasseur, Head of Global Execution Services at Nomura Japan, in a panel discussion at Nomura Investment Forum Asia 2023.

In Asia, there’s been a growing shift away from traditional methods of liquidity sourcing like high touch block desks to new innovative electronic platforms offering anonymous matching.

In the traditional block desk model - which involves showing orders into a sales trader who will then connect with the subset of third-party clients to find liquidity – the human aspect of the process can make it inconsistent across brokers and raise concerns of information management and adverse selection. However, with an electronic crossing platform, the sourcing process is conducted consistently and entirely in the dark pool without the need for information sharing or negotiation.

Launch of BlockCross

In response to client appetite for a new platform with unique liquidity and differentiated functionality, Instinet launched BlockCross Asia in March this year.

As a software application, BlockCross offers seamless integration with a buyside trader’s EMS, delivering an automated solution for block trading in Instinet and Nomura’s dark pools. Thanks to minimum size thresholds, users can be assured of block sized executions, with fills flowing directly back to their blotters.

BlockCross also offers conditional order functionality, an order type that itself is seeing a strong pick-up in adoption in the region. A conditional order allows a trader to rest their full size indicatively in multiple venues at one time and firm up wherever contra liquidity appears. It also enables a trader to continue to work their orders in the market while remaining open for crossing opportunities. Conditional order crossing platforms like BlockCross therefore remove the opportunity cost of keeping an order with any one broker or algo.

“The automated, conditional and anonymous nature of BlockCross really lends itself to an investor looking to trade multiple days worth of ADV or outsized dollar notional, discreetly and efficiently,” said Ned Millington Buck, Head of BlockCross, Asia Pacific at Instinet.

Collaborative approach between Traders and PMs

Another key trend worth noting is the increasingly collaborative approach to liquidity sourcing adopted internally by some of the buyside. “It’s been encouraging to see the success achieved in scenarios where PMs and traders have engaged each other on block opportunities and have sourced additional size as a result. Ultimately, we expect this level of collaboration and communication to continue and anticipate increasingly positive outcomes for clients,” said Dillon McNiven, Head of Instinet, Asia Pacific.


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