Light for Korean investors in Credit Suisse dark pool
CS says its black-box liquidity pool, Crossfinder, will extend to trades in South Korea.
Dark liquidity is coming to South Korea in the form of Credit SuisseÆs crossing engine, Crossfinder. The firm plans to roll it out there in the second half of this year, having already introduced it in Japan, Australia, Hong Kong and Singapore.
æDark poolsÆ are so named because they are anonymous, black box locations where buyersÆ and sellersÆ trades are matched away from the normal exchanges. The dark liquidity the pools provide is not visible to other market participants. Users of Credit SuisseÆs Crossfinder do not pay any extra fees over their usual commissions for using the service.
ôBy using a liquidity pool, a trader can avoid paying a bid/offer spread and serve to eliminate market impact of a trade,ö says Khaleel Mohideen, director of Credit SuisseÆs execution services in Hong Kong. ôMarket spreads in South Korea can be around mid-teen basis points.ö
Implementing dark liquidity systems into regional markets has to be done on a country by country basis, because each one has a different set of rules and regulations. In South Korea, there are minimum crossing amounts and price spread limitations. Furthermore, crossed trades need to be reported manually at the end of each day. Contrast this laborious procedure with Hong Kong, where trade reports are automatically generated.
Brook Teeter, director of advanced execution services at Credit Suisse in Hong Kong, says it offers algorithms allowing trades to remain in Crossfinder while looking for a match. ôOtherwise if trade canÆt find a partner, after a millisecond, it goes direct to the exchange,ö he says. The introduction of this platform should provide Korean clients with alternative sources of liquidity. He adds the firm may consider opening the platform to other providers and even the retail market.
Since introducing the Crossfinder product in late 2006, 5% of trades going through Credit Suisse have now migrated to the crossing engine. It was introduced to its Singapore trading earlier this year, and it has attracted 2-3% of Credit SuisseÆs aggregate Singapore trades.
æDark poolsÆ are so named because they are anonymous, black box locations where buyersÆ and sellersÆ trades are matched away from the normal exchanges. The dark liquidity the pools provide is not visible to other market participants. Users of Credit SuisseÆs Crossfinder do not pay any extra fees over their usual commissions for using the service.
ôBy using a liquidity pool, a trader can avoid paying a bid/offer spread and serve to eliminate market impact of a trade,ö says Khaleel Mohideen, director of Credit SuisseÆs execution services in Hong Kong. ôMarket spreads in South Korea can be around mid-teen basis points.ö
Implementing dark liquidity systems into regional markets has to be done on a country by country basis, because each one has a different set of rules and regulations. In South Korea, there are minimum crossing amounts and price spread limitations. Furthermore, crossed trades need to be reported manually at the end of each day. Contrast this laborious procedure with Hong Kong, where trade reports are automatically generated.
Brook Teeter, director of advanced execution services at Credit Suisse in Hong Kong, says it offers algorithms allowing trades to remain in Crossfinder while looking for a match. ôOtherwise if trade canÆt find a partner, after a millisecond, it goes direct to the exchange,ö he says. The introduction of this platform should provide Korean clients with alternative sources of liquidity. He adds the firm may consider opening the platform to other providers and even the retail market.
Since introducing the Crossfinder product in late 2006, 5% of trades going through Credit Suisse have now migrated to the crossing engine. It was introduced to its Singapore trading earlier this year, and it has attracted 2-3% of Credit SuisseÆs aggregate Singapore trades.
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