New Dark Pools promise to bring Asia greater liquidity, faster trades and lower costs.
|On N11ov. 11, 2010, Chi-East, a joint venture of the Singapore Exchange (SGX) and Chi-X Global, opened in Singapore.
Chi-East is headed by CEO Ned Phillips who oversees overall business strategy and development, as well as interaction
with participants and other stakeholders.
He says that Chi-East utilizes the same low latency, innovative trading technology as Chi-X. The main difference is in
the operating structure. Chi-East is the first independent exchange-backed platform which supports the non-displayed trading
of stocks across Asia in Singapore, Hong Kong, Japan and Australia on one single platform. The initial challenge is to
provide an efficient clearing and settlement system across all of the markets on our platform.
Phillips believes that Chi-East complements the existing marketplace and supports a more dynamic trading environment
in the region.
Ned Phillips, CEO Chi-East
A photo shot of the Chi-East web site.
Asean Affairs spoke
with Ned Phillips in
this exclusive interview.
Q: Do Asian markets need dark pools?
A: Yes. As global capital continues to shift
towards Asia, the local fund management
industry is rapidly maturing. However, traders
in Asia still face large spreads, lower
liquidity and more challenges than other
markets. The rise of more trading venues
such as dark pools will allow the buy-side
to pursue better execution, such as the
ability to execute large trades with limited
Additionally, the presence of dark pools
will bring more competitive forces in the
trading environment, resulting in lower
trading costs and improved efficiency,
which benefits all market players. Studies
show that dark pools increases liquidity
and narrow spreads.
Q: Will the Asian customer for dark
pools be the same type of customer as
those in Europe or the US?
A: in general yes. The main users of dark
pools are institutional buy and sell side.
They each have different ways of accessing
dark pools. For instance the buy side wants
to access block side liquidity while the broker
will send algorithims and Sor orders
so will have a much smaller trade size.
Q: Why have regulators been slow to
accept dark pools in Asia?
A: Many regulators have been quite open
to new trading mechanisms which benefit
local market participants. The difference
between the US and europe and Asia is
that Asian markets do not have a common
regulatory framework. We are hopeful that
more regulators will support the development
of non-displayed trading going
Q: How long will it take for alternative
trading systems to take hold in Asia?
A: This is really subject to the pace of
deregulation in each market. Already we
have seen Japan open up its securities
market to competition and Australia has
also expressed its desire to do the same. i
think that within the next 5 years, we will
start to see more and more countries go
down this path.
Q: Do dark pools and flash trading contribute
to the fragility of established
A: There has been no evidence of dark
pools affecting the stability or the price
discovery function of markets.
Q: financial markets face a “systemic
risk” from alternative trading platforms,
ronald Arculli, chairman of
Hong Kong Exchanges & Clearing ltd.,
said Dec. 9. Any comments?
A:There have been many studies on alternative
venues and the findings point toward
alternative venues improving the liquidity
and price discovery for markets. in europe
and the US, the levels of usage of the alternative
venues would certainly seem to indicate
that the users of markets do find benefits
from these venues.
We continue to work very closely with
regulators and other stakeholders to explain
the benefits of dark pools and how they
benefit the whole market.
Q: How do you “sell” dark pools to existing
A: Dark pools complement existing exchanges
by filling the liquidity gap for investors
looking to execute large orders while lowering
market impact. Without dark pools, many
of these larger transactions may not be fully
completed. Hence, dark pools are good for
local markets as they enhance liquidity. ..................................
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