Asia Sees the Light on Dark

Terry Flanagan

While many regions outside of the U.S. have been slow to embrace dark trading, the signs point to a growing acceptance of off-exchange liquidity.

“With markets like we’ve had, anonymous crossing platforms with quality liquidity become increasingly attractive,” said Glenn Lesko, chief executive of Instinet’s Asian operations. “The growth of our pools throughout the region underscores the embrace of off-exchange trading that we’ve seen by Asian institutions generally.”

Instinet operates a set of alternative trading platforms throughout Asia, including Australia, Hong Kong, Japan and Korea. For 2011, Instinet has seen its BLX Hong Kong pool grow by nearly 600%, while its CBX Japan unit saw 225% growth. Its JapanCrossing anonymous crossing platform, launched in 2003, traded an average of about $75.35 million per day in 2011.

Dark trading on proprietary trading systems (PTS) in Japan has reached about 8% in Japan as of late 2011. Dark trading accounts for about 11% of equities volume in the U.S.

Similar to Japan, Canada has also seen a slow adoption of dark trading, although that is also showing signs of changing. At the start of 2011, dark trading was about 1.5% of overall Canadian equities. Over the next 12 months that grew to over 5%.

Agency broker-dealer Instinet also owns Chi-X Global, the parent company of a host of alternative trading platforms in Canada, Japan and Australia. Chi-X Europe, which was the company’s initial offering, was spun off as a separate entity in late 2007, to be owned and operated by a consortium of financial institutions. Kansas City-based Bats Global Markets now owns 100% of Chi-X Europe.

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