Concerns about dark pools have come to a head and alternative markets in Asia Pacific are among those under scrutiny. This week’s edition of The Blotter explores this topic with a focus on the Australian market.
Asia Pacific liquidity fell through Q2, dragged down by bearish sentiment through the global equity markets and a general lack of investment momentum. The quarter finished with one of the lowest liquidity indicator readings of the past few years – this is only the second time since March 2009 and the midst of the global financial crisis that the liquidity indicator has dropped below 950.
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On June 26, 2012 Japan’s financial markets regulator, the FSA, took another step to promote market competition by revising exemption from the 5% Takeover Bid (TOB) rule. This move may have a profound effect on Japan’s Proprietary Trading System (PTS) providers over the coming months. This edition of The Blotter examines the history and development of PTSs in Japan and what this planned exemption may entail.
Asian markets are looking increasingly like markets in North America and Europe. Recent years have seen increased use of algos, dark pools, and dark pool aggregation.
As we enter the New Year—with hopes of better volumes and a bounce for our industry—Jamie Selway provides his annual list of market structure predictions and marks the book on 2011’s blotter.
As of October, Australia now has two competing, price-forming equity trading venues. In the coming months, there will be an impact on all those who trade Australian equities, and those buyside firms that use this change as a catalyst to adopt sophisticated technology and flexible trading tools will be those that benefit the most from this new, competitive market.
Following their North American and European counterparts, Asian traders are now extremely engaged in finding technological solutions to liquidity access. While dark pool aggregation is still in its early stages, David Stevens notes that this trend is likely to follow as well.
Although alternative trading venues have been around for some time in Japan, in the past year volumes in both dark and lit trading venues have taken off. This means that off exchange liquidity is now at levels no institutional investor should ignore
Continued pressure from commissions has forced buyside desks to take more control over their trading, using algorithms and lower touch solutions. At the same time, their relationships with brokers are critically important when trading in unfamiliar markets.
Some exchanges in Asia Pacific have responded to competitive pressures with a decrease in fees. Heightened awareness of implicit trading costs has also resulted in more focus on transaction cost analysis, and regulators have now added specific best execution policies. These moves could have a cascading effect throughout the region.