Liquidnet urges exchange partnerships, not mergers

Liquidnet urges exchange partnerships, not mergers

Seth Merrin, founder of institutional block trading venue Liquidnet, has told exchange bosses that they should look beyond mergers and acquisitions and return to their roots as trading venues that best serve individuals, listed companies and the broader market

Delivering the opening keynote at the World Exchange Congress in Madrid, Merrin outlined the need for a new market structure whereby institutions trade alongside the retail markets operated by exchanges.

"A single execution venue cannot efficiently handle all the competing interests in today's marketplace," he says. "In creating a whole new market structure, there are two important considerations. The first is to acknowledge the scale and size of the institutional market and the need for them to have a venue to trade safely and efficiently in the size that they need away from the retail market. The second is to recognize and adapt to the global nature of both exchanges and investors today."

Consolidation in the exchange trading business is forcing a series of mega mergers between the world's leading exchanges. However, proposed deals between Nyse Euronext and Deutsche Bourse, London and Toronto, and the Australian and Singapore Stock Exchanges need to overcome significant structural, technological and political obstacles in order to succeed.

Liquidnet has been touting an alternative strategic options to domestic markets, proposing liquidity partnerships between its own platform and national exchanges. A deal with SIX Swiss Exchange was unveiled in January through which Swiss exchange members will be able to use their existing front-end systems to trade in around 3600 international securities, covering, initially, Switzerland, the UK, France, Germany and the Netherlands.

Implementation is on target and expected to go live in the second quarter of 2011, says Merrin.

"We have made it easy for an exchange to go global," he continues. "Through one partnership, an exchange can open its doors to the 39 markets where we operate attracting more investable assets locally and presenting more opportunities for local brokers to go out globally - all in a safe and efficient manner."

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