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Instinet Adds Hong Kong Stocks to Asian Venue

- Updated November 9, 2014

Agency brokerage Instinet said last week that it is offering Hong Kong equities on CBX Asia, an alternative trading platform that was previously limited to Japanese stocks. Instinet, a subsidiary of Nomura Holdings since early 2007, began offering Japanese securities to institutional investors and broker-dealers in 2001 through CBX Asia. Although Instinet’s flagship platform in the U.S. is a dark pool, CBX Asia is licensed in Japan as a proprietary trading system, a status that requires that quotes be displayed. Existing clients will be able to start trading Hong Kong stocks immediately, said Nick McDonald, Instinet’s co-head of Asia-Pacific equities. CBX Asia can be accessed through the firm’s Newport execution management system or Asia SmartRouter, directly via the FIX protocol, or through several third-party trading systems, said McDonald. “There is no difference between trading Hong Kong equities and trading Japanese equities in CBX Asia,” he added. Instinet plans to begin rolling out stocks from other Asian markets before midyear, according to McDonald, though he declined to name them. “We take into consideration both market sizes and client demand when determining which to add,” he said. Instinet also operates crossing networks, which match trades at fixed points during the day, in Japan and Korea. CBX Asia uses the same technology as Instinet CBX in the U.S., but because the Asian platform is not a dark book “its success will depend on providing other advantages, such as alternative liquidity, lower latency, faster execution or lower trading fees,” said Neil Katkov, Tokyo-based analyst with Celent. Instinet makes CBX Asia data available to its members and through Thomson Reuters and Activ Financial Systems. While alternative trading systems (ATSs) have ratcheted up the competition for faster execution speeds and lower costs in the U.S. and Europe, they have not seen the same success in Asia-Pacific. “ATS usage in Asia has been rather muted due to regulatory restrictions, high levels of market concentration and relatively low levels of electronic trading,” said Katkov. “But the buy side in Asia is increasingly interested in choice, and ATS usage is expanding steadily, if slowly. If regulations change, this trickle could potentially turn into a flood.” In Japan, Credit Suisse and UBS match customers’ orders internally. Instinet launched its KoreaCross platform with Samsung Securities Co. in April, and buy-side block trading platform Liquidnet began providing equities from Hong Kong, Singapore, Japan and Korea in November 2007. Meanwhile, Australian regulators have delayed approvals for the nation’s first alternative trading networks, leaving Instinet, Liquidnet and AXE ECN waiting to open competitors to the Australian Stock Exchange. Beyond the regulatory issues, the infrastructure to support large-scale electronic trading isn’t yet available in Asia, said Aite Group analyst Sang Lee, adding that the benefits of the platforms are not widely known in the region. “More client education needs to be done,” he said. “Early market entrants like Instinet and Credit Suisse will lead the way in terms of providing the foundation for eventual growth of ATS usage in Asia.”

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