Business Times - 13 Aug 2009
SGX ties up with Chi-X to cross block trades in region for the big boys
By CHEW XIANG
(SINGAPORE) The Singapore Exchange (SGX) has joined hands with Chi-X to set up the region's first exchange-backed dark pool by mid-2010. The 50-50 joint venture will anonymously cross block trades of Singapore, Hong Kong, Japan and Australia-listed stocks for big funds and institutional investors.
Trades will be cleared through a pan-Asian central counterparty to be appointed, Chi-X and SGX said at a joint press conference yesterday. New York- headquartered Chi-X provides electronic trading platforms worldwide and a subsidiary will supply the technology for the planned dark pool.
'We expect and hope that it will improve overall trading liquidity here,' said Gan Seow Ann, senior executive vice-president and head of markets at SGX. The planned venture could be the fourth exchange-led dark pool set up, after NYSE Euronext's SmartPool, Nasdaq OMX's Neuro Dark and the London Stock Exchange's Baikal.
Incoming SGX CEO Magnus Bocker is now serving out his contract as president of Nasdaq OMX and is 'aware' of the Chi-X deal, said Mr Gan.
Dark pools, as the name suggests, provide a way to discreetly match large-volume orders without moving the market - making possible trades that previously would not have been crossed.
But they still rely on traditional exchanges for reference prices and there is concern, especially in Europe and the US, that markets will fragment as more trades take place in such anonymous venues, eroding the price discovery function of primary exchanges.
The joint venture between SGX and Chi-X is seen as a pre-emptive move. SGX's planned dark pool will act as an 'aggregator' linking broker-led dark pools as well as traditional brokerages, said Chi-X Global chairman Tony Mackay.
Two dark pools - Liquidnet, which focuses on buy-side clients, and CLSA-backed BlocSec - are already active in Singapore, and brokerages such as UBS are keen to introduce internal dark pools here as well. Dark pools already in Asia include those run by Goldman Sachs, Credit Suisse, UBS, Investment Technology Group and Instinet, which is Chi-X's parent company.
An exchange-backed dark pool would 'legitimise what we've been trying to do here to build up the market', said Greg Henry, head of Liquidnet in Singapore.
The pan-Asian dark pool will also complement Chi-X's efforts to introduce its alternative exchange systems throughout Asia, said Mr Mackay. These are essentially high-speed, low- cost electronic exchanges that in Europe have captured 15 per cent of trading in equities listed there, according to a June report from Aite Group. Chi-X is a market leader in such multilateral trading facilities there.
Chi-X was keen on setting up a similar alternative exchange in Singapore, according to a BT report last November. It has also applied, along with Liquidnet and AXE-ECN, a unit of the New Zealand Stock Exchange, to set up alternative exchanges in Australia. But the applications there have stalled as the Australian government has yet to grant market licences.
Such an exchange if approved in Singapore would have competed directly with SGX for trading fees but the two parties appear to have agreed to work together instead. Negotiations began at the start of the year, said John Lowrey, CEO of Chi-X Global.
Mr Lowrey said an exchange-backed dark pool would give it the size and the neutrality required to aggregate liquidity, and would also not hurt price discovery. 'I don't see dark pools dominating in terms of price formation,' he said yesterday.
Some fear that dark pools would also create an unequal playing field for investors but Chew Sutat, executive vice-president and head of market development at SGX, said the dark pool would not marginalise small investors. They could still access the primary market and should also benefit from increased liquidity in the system, he said.
The planned dark pool will apply for a recognised market operator licence here, Mr Lowrey said, and will get the necessary regulatory approvals in Australia, Hong Kong and Japan. 'Our experience has shown that users are looking for independent, genuinely neutral dark pools,' he said.
SGX ties up with Chi-X to cross block trades in region for the big boys
By CHEW XIANG
(SINGAPORE) The Singapore Exchange (SGX) has joined hands with Chi-X to set up the region's first exchange-backed dark pool by mid-2010. The 50-50 joint venture will anonymously cross block trades of Singapore, Hong Kong, Japan and Australia-listed stocks for big funds and institutional investors.
Trades will be cleared through a pan-Asian central counterparty to be appointed, Chi-X and SGX said at a joint press conference yesterday. New York- headquartered Chi-X provides electronic trading platforms worldwide and a subsidiary will supply the technology for the planned dark pool.
'We expect and hope that it will improve overall trading liquidity here,' said Gan Seow Ann, senior executive vice-president and head of markets at SGX. The planned venture could be the fourth exchange-led dark pool set up, after NYSE Euronext's SmartPool, Nasdaq OMX's Neuro Dark and the London Stock Exchange's Baikal.
Incoming SGX CEO Magnus Bocker is now serving out his contract as president of Nasdaq OMX and is 'aware' of the Chi-X deal, said Mr Gan.
Dark pools, as the name suggests, provide a way to discreetly match large-volume orders without moving the market - making possible trades that previously would not have been crossed.
But they still rely on traditional exchanges for reference prices and there is concern, especially in Europe and the US, that markets will fragment as more trades take place in such anonymous venues, eroding the price discovery function of primary exchanges.
The joint venture between SGX and Chi-X is seen as a pre-emptive move. SGX's planned dark pool will act as an 'aggregator' linking broker-led dark pools as well as traditional brokerages, said Chi-X Global chairman Tony Mackay.
Two dark pools - Liquidnet, which focuses on buy-side clients, and CLSA-backed BlocSec - are already active in Singapore, and brokerages such as UBS are keen to introduce internal dark pools here as well. Dark pools already in Asia include those run by Goldman Sachs, Credit Suisse, UBS, Investment Technology Group and Instinet, which is Chi-X's parent company.
An exchange-backed dark pool would 'legitimise what we've been trying to do here to build up the market', said Greg Henry, head of Liquidnet in Singapore.
The pan-Asian dark pool will also complement Chi-X's efforts to introduce its alternative exchange systems throughout Asia, said Mr Mackay. These are essentially high-speed, low- cost electronic exchanges that in Europe have captured 15 per cent of trading in equities listed there, according to a June report from Aite Group. Chi-X is a market leader in such multilateral trading facilities there.
Chi-X was keen on setting up a similar alternative exchange in Singapore, according to a BT report last November. It has also applied, along with Liquidnet and AXE-ECN, a unit of the New Zealand Stock Exchange, to set up alternative exchanges in Australia. But the applications there have stalled as the Australian government has yet to grant market licences.
Such an exchange if approved in Singapore would have competed directly with SGX for trading fees but the two parties appear to have agreed to work together instead. Negotiations began at the start of the year, said John Lowrey, CEO of Chi-X Global.
Mr Lowrey said an exchange-backed dark pool would give it the size and the neutrality required to aggregate liquidity, and would also not hurt price discovery. 'I don't see dark pools dominating in terms of price formation,' he said yesterday.
Some fear that dark pools would also create an unequal playing field for investors but Chew Sutat, executive vice-president and head of market development at SGX, said the dark pool would not marginalise small investors. They could still access the primary market and should also benefit from increased liquidity in the system, he said.
The planned dark pool will apply for a recognised market operator licence here, Mr Lowrey said, and will get the necessary regulatory approvals in Australia, Hong Kong and Japan. 'Our experience has shown that users are looking for independent, genuinely neutral dark pools,' he said.
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