After a record February, Liquidnet, the so-called dark-pool trading network for asset managers, will soon have as many as 58 Australian funds as customers.
Liquidnet says investors seem to be putting more money in stocks, helping to underpin the prospects of further record volumes for the company during the rest of the year.
In February Liquidnet had almost $1 billion of trades. Its average trade size per day was $1.5 million. There are 220 international investors that are signed up with Liquidnet, providing $2.2 billion in daily liquidity.
“There is clearly some momentum at the moment,” says Sam Macqueen, head of Liquidnet in Australia. “There is confidence – particularly as volatility has come out of the market – so global institutions are putting money to work.”
Liquidnet’s technology sweeps the order management systems of its asset management customers, putting their orders into an anonymous – or dark – pool, where they can be matched with similar orders. To be a Liquidnet customer, an asset manager must have more than $200 million under management.
When Liquident started its business in Australia four years ago, it had just nine customers. Now it has 48 and is expecting to sign 10 more soon.
Dark pools may complete as much as 24 per cent of total Australian stock trading, according to market participants. Regulators are concerned that if too much trading is done in dark pools, share price discovery will be hurt.
Macqueen, however, says for asset managers who trade orders worth hundreds of thousands or millions of dollars, dark-pool trading options are essential.
“There is so much flow in the dark as people want to hold onto intellectual property, they don’t want any information leakage,” he says.