Bloomberg
Executions will take place at the midpoint of the best bid and offer on the Hong Kong Stock Exchange. The New York-based broker will expand Posit Marketplace to Australian stocks in the second quarter and in Japan stocks later this year. ITG traded 1.9 percent of U.S. equities last month.
“Finding liquidity is a challenge for the buyside in Asia,” said Rowsell of ITG Hong Kong. ITG is starting the initiative in Hong Kong because client demand for the private venues has been strongest there, she said.
Dark pools, trading platforms that execute stock without displaying prices, are developing in Asia for brokers and institutions seeking to transact without going to public stock exchanges. There are about 40 dark pools in the U.S.
More than 100 clients will have access to Posit Marketplace in the early stages of the system, according to Rowsell. These include regional firms in Asia, global brokers with Hong Kong trading desks, and other clients outside the region executing Asian securities.
ITG has had a crossing system in Hong Kong that matches buy and sell orders at specific times. Posit Marketplace will allow continuous matches of buy and sell interest throughout the day. It will also route orders to dark pools operated by other brokers. Rowsell declined to name those venues.
Seeking Liquidity
“Asia is in the early stages of what the U.S. and Europe have gone through in terms of the fragmentation of markets and trading venues,” Rowsell said. The ability to access dark venues through an algorithm benefits investors searching for liquidity, she added.
Trading costs for institutional investors are two-thirds higher in Asia than in the U.S., Rowsell said. The cost averaged 96 basis points in Asia in the fourth quarter, according to ITG data.
ITG’s Posit dark pool accounts for one-third of the broker’s trading in the U.S. and “roughly” a third in Europe, Rowsell said. She declined to estimate how much volume in Hong Kong stocks Posit Marketplace might execute by the end of the year.
Electronic trading in Asia is increasing. Last year, 18 percent of equities trading in Asia took place electronically, according to research firm Greenwich Associates in Stamford, Connecticut. The firm said it would rise to 28 percent by 2012.
--Editors: Nick Baker, Chris Nagi
To contact the reporter on this story: Nina Mehta in New York at nmehta24@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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