Chi-East, a joint venture between trading platform provider Chi-X and Singapore Exchange (SGX), will use London-based LCH.Clearnet as the clearing facility for Asia's first exchange-backed dark pool.
"We conducted a formal RFP and received eight high-quality responses," a spokesman for Chi-X tells AsianInvestor. "One thing this process demonstrated is there is real capability and intent to enter and/or expand in Asia among these organisations."
Asked about the issue of high-frequency traders potentially pushing up prices for other users of Chi-East, the spokesman said the platform "will incorporate appropriate features to discourage any potential gaming".
The spokesman declined to comment on the type and size of capital reserve or backstop that LCH.Clearnet will put in place. He would only say that Chi-East has submitted an application to the Monetary Authority of Singapore for a regulated market operator licence.
Scheduled to launch in mid-2010, Chi-East will be run by Ned Phillips, who recently left BlocSec, CLSA's dark pool.
Chi-X has also made applications to operate displayed, or 'lit', markets in Australia and is in discussions elsewhere in the region, says the spokesman. The firm clearly wants to stress it seeks to complement rather than compete with Asia-Pacific exchanges. Chi-X chief executive John Lowrey told the TradeTech conference yesterday in Singapore, "regional or local exchanges with highly developed products and evolving services will remain highly competitive".
Subject to agreeing terms with Chi-East and obtaining regulatory approvals, LCH.Clearnet's EquityClear service will clear Australia-, Hong Kong- and Japan-listed securities available for trading on Chi-East. SGX-listed stocks will be cleared and settled through SGX's securities clearing house and depository.
Chi-X partnered with SGX in August to develop and launch the dark pool, starting with selected securities listed in Australia, Hong Kong, Japan and Singapore.
Chi-East will act as an independent liquidity aggregator for the sell-side and offer another execution option in the form of a non-displayed venue that will expand the range of available solutions for conducting block trades. Chi-Tech, the technology subsidiary of Chi-X, will provide the technology for the trading platform.
Lowrey says the response from potential users of Chi-East has been extremely positive.