Dark pool operator sees bright future in Hong Kong
Electronic trading has much room to grow despite the regulator's curbs, says Liquidnet
Liquidnet, one of the largest dark pool operators in Asia, believes trading in Hong Kong on electronic platforms will continue to grow despite the regulator tightening regulations.
Dark pools are electronic platforms that have emerged in recent years in advanced markets such as the United States and Britain. They allow traders to buy or sell large blocks of shares without having to disclose their identities, the volume or prices, as opposed to requirements at traditional exchanges.
"Institutional investors and pension funds find it very useful for large-blocks trades. Trading on Liquidnet will definitely continue to grow in Hong Kong, which is now our largest market in Asia," said Lee Porter, the head of Asia-Pacific for Liquidnet.
The platforms are operated by brokers or independent companies and are popular with pension funds and asset managers as the anonymity allows them to keep their strategies hidden from the public eye, cut transaction costs and avoid setting off unwanted price movements.
While many institutional investors like to use the platform, traditional exchanges worldwide have called for curbs to increase their transparency.
Securities and Futures Commission chairman Carlson Tong Ka-shing has said that the regulator was studying ways to tighten the regulation of dark pools and a consultation paper would be released this year.
Porter said some overseas regulators, such as the one in Australia, were also reviewing dark pool regulations and that he believed Hong Kong would take into account what other regulators were doing.
He said he hoped the regulator would take a balanced approach in its proposals.
Dark pools only have a small presence in Hong Kong and other markets in Asia. The 14 dark pool operators in Hong Kong represent just 3 per cent of the total market turnover, but they represent 50 per cent of all trades.
Porter is optimistic about the Asian market outlook for dark pool developments and yesterday launched a new dark pool in Thailand, its 10th market in Asia and 42nd worldwide.