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Alternative Trading Venues in Asia: A Primer

Electronic Communication Networks (ECN), Darkpools, Alternative Trading Systems (ATS), Multi-lateral trading facilities (MTF), crossing networks we’ve all heard about them and Asia’s electronic trading industry is no exception. In fact ITG POSIT has been available in Asia since 2003. They provide execution in Hong Kong, Australia, Japan and Singapore with the Singapore flow going through Credit Suisse (I think). Speaking of which CS Crossfinder has been in Asia for a number of years too offering non-display execution also to Hong Kong, Australia, Japan and Singapore.

MTF is a term used in Europe spawned from MIFID. PTS or Proprietary Trading System is term coined in Japan. and SBI Japannext lead the darkpool segment in Japan. Having been around for a few years already they have had some success in their local market despite the lack of smart order routers to sweep for liquidity. The Tokyo Stock Exchange’s (TSE) recent technology overhaul, in part, will be a direct challenge to these venues.

I think the most interesting and best placed to take advantage of an open and competitive Asia is Instinet. They operate CBX Asia, JapanCrossing and KoreaCross as well as offering execution to Singapore, Hong Kong and Australia. KoreaCross, with Samsung Securities, places Instinet in a unique position by offering more execution venues under one roof than any other broker in the zone. Moreover, Nomura the parent company of Instinet recently launched NX MTF in Europe. They are piecing their global crossing network together; ideal for the program trading desk to be sure.

Native to Asia is CLSA’s BLOCSEC. Launched in 2008 they offer execution to Singapore, Japan and Hong Kong through a web based front end where BLOCSEC is the counterparty to all trades. Of course, SIGMA X, CitiMatch, UBS PIN and Liquidnet have their foot print here in Asia as well.

Unfortunately, none of these venues provides volume or market share information unlike in the US and Europe but as Asia continues to offer ever increasing sophistication in its execution services that should be forth coming in time.

New entrants into Asia’s darkpool space include Chi-East and AXE ECN. Chi-East as an interesting marriage of Chi-X and the Singapore Exchange. In a manner of speaking Singapore has cast the gauntlet at its regional rivals in allowing competition, albeit, in its small equities market. Granted it’s likely to cause fragmentation in an already and expensive market to trade (80bps according to a recent ITG research report) but crossing that upstairs flow at the mid point will surely make the buyside happy.

Another new encumbant in the ECN Space is AXE ECN, due to go live by year end, it is jointly owned by the New Zealnd Exchange (NZX), Citigroup, CommSec, Goldman Sachs JBWere, Macquarie Bank and Merrill Lynch.

Exciting times here in Asia and sophisticated trading serices are just one of them. There is a landing page for Asia’s alternative trading venues for your reference but I can't link it here.


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