07.28.2011
By Terry Flanagan

Liquidnet Looks Abroad

EDITOR’S PICK: Alternative trading system seeks to join forces with more exchanges as a means of tapping into large overseas markets.

Liquidnet’s recently announced block-trading alliance with SIX Swiss Exchange shapes up as the first of multiple partnerships with overseas exchanges, executives of the alternative trading system signaled at a press briefing on Tuesday.

While news of potential mergers and acquisitions dominates headlines, Liquidnet Chief Executive Seth Merrin said the pursuit of more trading volume and investment remains the focus of most exchanges worldwide.
That is where Liquidnet comes in, according to its executives. “If you make trading more efficient, there will be more trading,” Merrin said.

The Liquidnet-SIX Swiss partnership will allow the Swiss exchange to direct executable block orders to Liquidnet’s service. With technological and regulatory constraints keeping costs high and suppressing market activity in many countries, “the deal is the first example of Liquidnet knocking down some of those barriers,” said Merrin.
The alliance of a dark pool and a listed exchange is notable in that the entities are typically seen as competitors. The Liquidnet-SIX Swiss joint venture is designed to pool liquidity and ultimately make trading more efficient.
While Liquidnet currently operates in 39 markets, further penetration in the European market may pose some unique problems. “There are a lot of different cultures in Europe,” said John Barker, Liquidnet Europe managing director. “Right now we have about 50% of the asset managers on board, so we have a strong pipeline of assets,” with around about $27 billion in daily flow, he said.

Although Liquidnet has been in Europe for nine years ago, alliances with exchanges weren’t feasible until the dark-pool operator showed staying power and the exchanges “grew up” over the past couple of years, Barker noted.
“It’s a changing world,” said Barker. “There were exchanges that didn’t want to even see us or meet with us the last few years, but now they do. The Swiss exchange is the first of hopefully many more exchanges” that Liquidnet will work with, Barker added.

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