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Liquidnet CEO Merrin Frowns On Exchange Mergers

The dark pool's founder said exchanges around the world would be better served with strategic alliances that can bring more value to institutional investors.

Liquidnet Chief Executive Seth Merrin implored exchanges to stop looking for merger opportunities and to instead focus on establishing global alliances amongst each other in order to better serve institutional investors.

In remarks delivered to more than 100 global exchange executives at the World Exchange Congress in Istabul, Merrin pointed out a number of similarities between the airline and exchange industries, noting the strong nationalistic sentiment that usually accompanies international mergers in both; highly competitive environments in both industries that's being driven by the entrance of low-cost providers, and a shared record of unsuccessful M&A activity.

Merrin said the global exchange industry would be better served with alliances like the one Liquidnet formed with the SIX Swiss Exchange last year. Under their agreement, members of the SIX Swiss Exchange can direct executable block orders to Liquidnet's global trading network, which includes 630 asset managers who manage some $12.4 trillion in assets.

"Exchanges are missing a significant opportunity to differentiate themselves by not providing a premium, high-margin offering for institutional investors," Merrin said in the conference's opening keynote address. "By catering to the needs of this underserved constituency, exchanges will benefit with increased execution sizes, increased liquidity and a more efficient market where they can attract greater investment from around the globe."

Merrin added that exchanges should follow the example set by the most successful players in the airline business, by selling more to their existing client base and differentiating their offering by focusing on a premium customer through strategic global alliances, rather than simply looking for merger opportunities.

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio

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