ITG has launched its new Posit Marketplace dark pool in Asia to trade Hong Kong equities.
Posit Marketplace accesses institutional liquidity from ITG’s Posit global crossing network as well as dark liquidity from outside internalization pools and venues in Asia.
“In Asia trading costs are high – around two thirds higher than in the U.S.” explains Michael Corcoran, Head of Sales and Trading, Asia Pacific at ITG. “Posit Marketplace connects ITG’s own dark pool with other dark venues, maintaining anonymity about the intention to trade throughout the process, which minimizes market impact. Although trades are reported to the exchange immediately after as per local market requirements.”
Although he would not specify which dark pools are being accessed through Posit Marketplace, Corcoran says, “We’re starting with a couple of broker-backed pools, with more to follow.”
He adds that as different types of dark pool develop in Asia, whether exchange-backed or independent, the goal would be to connect with them as well.
“Orders in Posit Marketplace are put into a continuous matching algorithm that constantly searches the system looking for the other side,” explains Corcoran. “This will automatically identify any natural crosses within ITG’s internal Posit liquidity pool as well as in the external dark pools.”
He says that so far almost 100 institutions are set up to have their order flow participate in Posit Marketplace. But dark pool volumes in Asia are still in the slow growth phase.
“Market regulations mean that most trades still need to be reported, and in some cases traded on the exchange, even if they are matched in a dark pool,” notes Corcoran. “This limits true ‘off market’ volume.”
But he sees the dark pool trend increasing in the region none-the-less. “The buy side in Asia is now demanding more efficient trading, driven both by the high costs of trading in the region and by experience from other regions that dark pools can help to address those costs,” says Corcoran. “We’re also seeing the Asian market open up to more competition, admittedly a few years behind the U.S. and Europe. The number of broker pools is growing and exchange-backed or independent dark pools are evolving.”
Posit Marketplace is currently available for Hong Kong equities, but Corcoran says the next steps will be to roll it out for trading in Australian and then Japanese equities.