Instinet Pacific Ltd has launched BlockMatch Asia, an Alternative Liquidity Pool for the trading of non-displayed equities.
BlockMatch Asia will go live with Hong Kong securities first before expanding to other Asia-Pacific markets, Instinet executives said. The trading platform will save institutional traders as much as half of the bid-ask spread, which is wider in Asia than in other developed markets.
“The Hong Kong market looks different compared with the European and U.S. marketplaces, in terms of fragmentation and in terms of services the exchange provides,” said Ian Lauder, Head of Liquidity Strategy, Asia Pacific at Instinet. “Therefore, it is incumbent on investment firms like Instinet to provide solutions for clients to manage market impact through non-display trading.”
Previously operated as CBX Hong Kong, BlockMatch Asia provides two distinct order books: a Limit Crossing Book and a Market-on-Close Book, Instinet said in a release. One of its main features is the addition of a Conditional Book for the submission and management of conditional orders, which better enable institutional buy-side firms to source block-sized liquidity by “resting” a large parent order while working the order elsewhere in the market.
As the matching of conditional orders takes place within non-display mechanisms, users can manage risks of signaling and market impact, allowing for more efficient trading.
Conditional orders can match at the mid-point price of the primary exchange, enabling users to save half the bid-offer spread, Instinet said. That spread is particularly relevant in APAC markets such as Hong Kong, where bid/offer spreads can average around 12 basis points, compared with about 3-4 basis points in the U.S., Europe and Japan.
For a $1 million trade, a savings of 6 basis points would be $6,000.
As Instinet operates globally, the underlying technology for BlockMatch Asia will be leveraged from trading platforms in the U.S. and Europe, with customization and tailoring to the local Hong Kong market.
“We believe that now is the time to introduce conditional orders through BlockMatch Asia because it’s the next evolutionary step in the market microstructure,” Stuart Knowling, CEO of Instinet Pacific, said in the release. “Clients are always looking for liquidity and conditional orders are perfect for that in some of the tougher to trade markets in the region.”
