Liquidnet To Expand Data Offering To Buy Side
Liquidnet, the institutional investor block trading network, will launch a data offering to help asset managers capture more alpha following its acquisition of RSRCHXchange, a marketplace and aggregator for institutional research.
Brian Conroy, president of Liquidnet, told Markets Media: “We are continuing our quest to solve problems in our industry by using technology to make investors’ lives easier.”
This week Liquidnet announced the acquisition of RSRCHXchange, which was launched in 2015 to distribute research from a variety of providers to asset managers through a centralized, cloud-based hub.
— Liquidnet (@Liquidnet) May 13, 2019
Conroy added that RSRCHXchange makes delivery of research easier and more robust and the firm’s ethos and culture fits with Liquidnet. He joined Liquidnet in February this year in New York from Fidelity International in London where he had been president. Prior to Fidelity Conroy was president of Fidelity Capital Markets and global head of equity trading in Boston for FMR.
“With my background in asset management and Liquidnet’s integration of OTAS Technologies we recognise an opportunity to increase efficiency,” he added.
Liquidnet acquired OTAS in 2017. OTAS was launched in 2011 to analyse market data and highlight actionable information for equities trading to fund managers in an easily digestible visual format. Software analyses changes from the normal pattern in data such as insider transactions, short interest, options and credit default spreads and automatically highlights the most relevant signals for stocks in their portfolio for review.
Conroy said the addition of RSRCHXchange allows Liquidnet to provide a new level of research and analytics more efficiently so the buy side can capture more alpha.
“We are running a pilot with large asset managers in the US over the next few months and will launch a cohesive offering that is driven by our members,” he added.
MiFID II unbundling
Vicky Sanders, co-founder of RSRCHXchange, told Markets Media that MiFID II was a catalyst to launch the firm but the real driver was the lack of technology being used in research distribution.
“We wanted to use technology to distribute research in the same was as it is used in other industries such as music and video,” she said.
MiFID II required the unbundling of research payments from trading commissions, and as a result most asset managers have chosen to pay for research out of their own revenues.
Conroy said: “We want to provide all types of music and this is just the beginning.”
Approximately 1,200 fund managers subscribe to RSRCHXchange and Sanders said their client list is complementary to Liquidnet. She said: “We are bigger in Europe where we launched and have a larger number of smaller and medium sized asset managers.”
In addition approximately 400 research providers contribute to the RSRCHX platform, with nearly 40% of the research coming directly from investment banks and sell-side brokers.
Sanders and co-founder Jeremy Davies will continue to oversee the day-to-day operations of RSRCHXchange and work closely with the Liquidnet team to develop an integrated solution, reporting directly to Conroy.
NovitasFTCL acted as the exclusive financial advisor to RSRCHXchange. The firm was owned by management, NEX Opportunities (CME Group) and private investors.
Sandy Bragg, principal at consultancy Integrity Research, told Markets Media that for RSRCHXchange, the acquisition offers broader access to US-based asset managers and technology support for its infrastructure.
“The buy-out is a welcome relief after MiFID II put a damper on purchasing the platform’s core offerings of independent research, as the European buy-side concentrated research purchases on its largest broker relationships,” Bragg added. “For Liquidnet, the acquisition is more fraught, as its core trading audience is increasingly separated from research. Retooling RSRCHXchange as a virtual sales trader pitching investment ideas is an interesting concept, but might be difficult to execute.”
Cutting-edge technology and full alignment with client interests are must-haves.
Non-volume related revenue was 47% of total group proceeds.
The extended trading phase will enable transactions at an already-established closing price.
Regulators wanted MiFID II to steer equity trades toward lit venues.
TradingScreen notes that for hedge funds, equities 'electronification' is only one piece of the puzzle.