Asian players give system for block trading mixed reviews
Hong Kong and other Asian markets are trying a key electronic trading system popular on Wall Street, but some say the fit is too big.
Autex - an electronic exchange that can help brokers and fund managers find counterparties on big block trades - has reached desktops in Asia.
The exchange, one of the assets in Canada's ever-growing Thomson Financial Group, offered the system on a trial basis to a handful of Asian brokers and institutions earlier this year. It now has 32 users in the region, excluding Japan but including India and Australia.
'They're using it because identification of counterparty and location of liquidity in equities are fundamental to reducing the cost of dealing and minimising market impact,' Autex Asia-Pacific general manager Martin Severn said.
The system lets brokers list big trades they have done recently - thus advertising that they might be a good partner for big trades.
It also allows brokers and fund managers to message all or some of the system users to transact large trades in a block - and hopefully as smoothly as possible.
On Wall Street the system can help pinpoint buyers and sellers in one quick flash - while working the phones can spread word of a big trade on the way.
However, some feel that in a market like Hong Kong it is much quieter to stick to the phones.
'I think it's a good tool of advertising once a trade has been done and from time to time might help attract more trade on the ADR (American depositary receipts) side,' HSBC trading head Au-yeung Tat said. But he feels sending a broad message out to test the market on a trade would be advertising too widely.
'In Hong Kong you could probably name a handful of clients that own the stock you have interest in. Autex is a very effective way of communicating order flow in the States but not so much in Asia,' he said.
He added that other markets put up regulatory barriers to a pre-information trading system. For instance, while Autex could help facilitate cross-trades in the US, out here they were prohibited in South Korea or Taiwan.
Mr Au-yeung said brokers were nevertheless using the system because electronic communications were the 'way to go forward . . . maybe you just call the clients for the important news but message him otherwise'.
In the US, Autex charges per message but in Asia, it is waiving messaging fees at present. The system will soon be rolling out in Japan as well.
Mr Severn estimated a block trade in Asia might be 100,000 shares of Cheung Kong (Holdings).