Chi-East, the 50:50 joint-venture dark pool between Singapore Exchange and Chi-X Global, is slated to go live by the end of the second quarter, says Ned Phillips, the JV's Singapore-based chief executive. "We have enough client demand," he says.
The network will cover cash equities for Australia, Hong Kong, Japan and Singapore, and will be the first pan-Asian dark pool with continuous crossing. Phillips is talking with the buy-side about the use of such networks in the run-up to Chi-East's launch, as well as working with the sell-side with regard to connectivity.
Chi-East will be a broker-to-broker platform for electronic trades, offering direct market access, algorithms and smart-order routing.
It competes by being pan-Asian and by offering mid-point pricing during trading hours. This allows brokers to "save the spread" by agreeing a mid-point price between bids and offers, instead of requiring one party to give in and agree to a full spread.
Phillips says this will benefit buy-side traders looking for best execution. Chi-East offers millisecond latency, meaning its platform is so fast that it can capture the correct mid-price point. Prices are sourced from quotes on the relevant exchange; Chi-East will not create prices.
It can also offer a guaranteed volume-weighted average price (Vwap) for orders conducted before a given market opens. This can accommodate buy-side traders' instructions to seek Vwap. Chi-East uses Bloomberg-derived benchmark Vwaps, with calculations based on statistics sourced from the primary exchange.
The JV's goal, says Phillips, is to become the leading alternative trading venue in each of the four markets it serves (not counting investment banks' internal crossing networks).
The platform is regulated in Singapore and is not operating under the laws of other jurisdictions, but it will respect local laws in spirit, Phillips says. For example, it will not be registered as an onshore 'proprietary trading system' in Japan, but it will follow rules for Japanese PTSs, such as not allowing short sales for that market. It will allow short sales in the other jurisdictions.
UK-based LCH.net is the central counterparty. Chi-East will send trades to LCH for clearing and netting. Citi will handle settlement and ensure shares end up in the relevant depository.