block liquidity may remain challenged as new volumes execute in smaller sizes and across multiple venues.
Alan Polo is Head of Equity Sales and Trading, Americas at Liquidnet.
What were the key themes for your business in 2023?
This past year was all about Liquidnet getting back to its roots while continuing to innovate. In a low-liquidity environment, our buy-side Members leveraged us to support them with their most difficult challenge, and what we happen to be known for, sourcing block liquidity. This took the form of investing in existing features and infrastructure related to our front-end system to ensure its up to date and performs well. We also focused heavily on our algo suite, specifically dark aggregation, with onboarding new venues to ensure our clients have comprehensive access to all available liquidity in the market to help navigate fragmentation.
What was the highlight of 2023?
Buy-side traders having to do more with less intensified in 2023. This was evidenced in our interactions with clients. They wanted less people involved in the process and that’s something I identified as I took on this role earlier in the year. We addressed this shift by reorganizing our coverage teams from being product to more client focused. This enabled us to consult with our clients and provide solutions to assist with their workflow challenges. We are now better positioned to help them navigate the market by taking a holistic look at their workflows.
What are your expectations for 2024?
I believe we will see the rate landscape change earlier than later in 2024. There’s currently a lot of cash on the sidelines or outside of equity markets so once those rates start to come down again, the equity markets should become more attractive leading to an improvement in volumes. However, I think block liquidity will remain challenged as I expect these volumes to execute in smaller sizes and across multiple venues.
I also think trends that emerged in 2023 with traders struggling to find liquidity may be here to stay. Quite a few of our Members asked us to customize the algorithms they use from us. This was a huge success for clients that wanted to cover themselves with liquidity executing elsewhere but still exposing their order within our most protected pool to take advantage of block liquidity in an automated fashion.
What trends are getting underway that people may not know about but will be important?
Something we heard from Members at our Liquidnet Labs events is that there’s a gap in the market for buy-side traders looking to trade size that is multiples of ADV. This growing trend is one we’re looking to address. In short, we’re looking to introduce a solution that would allow our users to submit size while feeling confident that we are using a policing model to balance information give-up vs. Superblock capture.
