04.20.2012
By Terry Flanagan

Liquidnet COO Plans Global Expansion

Liquidnet, the world’s largest independent dark pool operator, has a renewed focus on geographical expansion, according to recently appointed chief operating officer John Kelly.

“We are aggressively committed to operating with a global perspective,” said Kelly. “Our clients are always looking for new markets where capital can seek return.”

While Liquidnet currently has a strong presence in Europe and the Asia Pacific, it is continuing to look for further opportunities, including the Brics countries. Chief executive Seth Merrin recently said that the Liquidnet is “hopefully going to move into India this year,” adding to its offices in Sydney, Singapore, Hong Kong and Tokyo, and its recent expansion into the trading of Malaysian and Indonesian stocks. In total, the company operates in 39 equity markets worldwide.

Liquidnet in January appointed John Kelly in the newly created position of COO, filling a key spot on the firm’s leadership team. The 30-year veteran Kelly had previously been providing strategic advisory services and also spent time at Societe Generale in management positions.

At the same time, Liquidnet also appointed Lugene Forte as head of U.S. sales and trading, replacing Alfred Eskandar, who left late last year to head up Portware.

Liquidnet’s global plans come on the back of a strong first quarter, in which it saw a 25% increase in trading volume quarter-over-quarter. This came despite an 8% drop in overall U.S. equities trading volume.

“We also saw a strong performance in Europe and Asia, where we were up 43% and 49%, respectively,” said Kelly. “In every geographical region we operate in, our core business is up. What we’ve seen is, whenever market liquidity goes down, the value of our core offering for customers goes up. Large block liquidity is always valuable. When liquidity is down, the market is thinner, so the ability to put orders into Liquidnet is all the more important.”

Liquidnet last year formed a partnership with the SIX Swiss Exchange, whereby the Swiss-based trading venue can direct executable block orders to Liquidnet’s service. According to Kelly, Liquidnet is in ongoing discussions with other European exchanges looking to also connect to its dark pool.

Despite the strong performance during the first quarter, Liquidnet has not been able to counteract the overarching downturn in trading volumes on a year-over-year basis. Trading volume at the dark pool is down about 13% compared to last year, which is in line with the broader equities market.

“The Eurozone crisis is causing investors to take money out of equities and into alternatives, whether Treasurys or other fixed income products,” said Kelly. “We’ve seen significant movement of funds away from equities and into high-yield products.”

Liquidnet and other dark liquidity pools are marketplaces where institutions and asset managers can execute large block trades anonymously and without market impact.

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