Electronic trading platform operator Liquidnet reports that decent liquidity is returning to local markets in Asia and it is matching more trades than ever before in the region.
The company, one of the most widely used dark pools by buy-side traders, reports average execution sizes in Asia now of around $1.3 million, up from $800,000-900,000 six months ago.
"Things started to get back on track in the middle of last year," says Lee Porter, Asia-Pacific managing director at Liquidnet in Hong Kong. "There has been more confidence and the markets have been less volatile."
Liquidnet prospers when markets are more settled, he adds, since traders are far more nervous about trading big blocks of stock in periods of high volatility.
Others are also bullish on the shift towards new platforms. There are big changes looming in the way securities are traded in the region, agrees David Russell, Hong Kong-based head of securities and funds services for Asia at Citi.
"This is a big growth area for us and we are putting a lot of resources in that space," he adds. For example, the US bank is involved in setting up the processes and links behind Chi-East, the joint venture between Singapore Exchange and Chi-X.
As a comparison, Russell cites the UK equities market, where 40% of trading is now off-exchange, up from "virtually zero" two years ago. "Asia hasn't really seen that [level of growth] yet," he adds, "but it has started."
The potential is certainly there. While Liquidnet block sizes are far larger than the average size of executions at, for example, Hong Kong Exchanges and Clearing (about $10,000), total volumes on the platform represent less than 1% of trades going through Asian exchanges.
Having opened in Asia in November 2007 with 35 clients, Liquidnet now has offices in Hong Kong, Singapore, Sydney and Tokyo. It has more than 170 clients globally trading Asia-Pacific stocks through its platform and provides more than $7 billion of liquidity daily.
Porter says uptake in Liquidnet has been most successful in Asia among companies already using it in other regions such as the US and Europe, but it is making inroads with domestic Asia-Pacific managers, particularly in Australia.