InstinetÆs new Asia CEO expects more unbundling

Glenn Lesko has moved to Hong Kong to run InstinetÆs regional business on expectations that buy-side traders will use more execution-only services.

Instinet has transferred Glenn Lesko from New York to Hong Kong to serve as CEO for the business in Asia, including Japan, Korea and Australia.

Lesko previously headed the firm's US-based international trading group, and has also held senior roles at CF Global Trading, Deutsche Bank and ABN Amro. Most of his career has involved sales trading on behalf of US clients trading Asian equities.

He fills a position that has been vacant since Joe Marshall left at the end of last year. Fumiki Kondo, co-CEO of Instinet, served as interim executive.

Lesko says the Asia business is less electronic than in Europe, and more reliant on a global rather than a local clientele. He expects both of these things to change over time, as the region's market structure evolves.

For now, most clients in Asia want high-touch sales trading service. But Lesko notes that regulators in Japan are now considering allowing unbundling of execution from other brokerage services for onshore investors.

"The biggest obstacle in Asia to best execution is that if there is no unbundling allowed, then there is no execution-only trading," Lesko says.

Unbundling is becoming more common in the rest of the region as more buy-sides take up electronic trading, use of algorithms and transaction-cost analysis. Most trading desks in Asia are attached to global fund management companies, rather than local shops, and these firms are unbundling or entering commission-sharing agreements on a global basis. Such deals are therefore being extended to Asia.

Another important trend in Asia is the possibility of local markets licensing alternative exchanges, and the proliferation of tools to aggregate different pools of liquidity.

In Japan, for example, authorities already recognise dark pools and other so-termed Proprietary Trading Systems. As financial markets stabilise and trading volumes recover, brokers are building more links to such venues. Lesko expects similar activity to spread to Hong Kong, Singapore and Australia.

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