Citi rolls out dark pool in Japan

Citi has added to its handful of internal dark pools across Asia with the launch of Citi Match in Japan. It was set up six weeks ago, and crossing rates -- the percentage of matches that take place -- have been encouraging, says Ben Valentine, Asia-Pacific head of electronic execution sales at Citi in Hong Kong. 

Citi would not reveal the precise success rates for the new dark pool, which is run by Dan Kerrigan, head of execution services for Japan. Certainly, other dark pool providers such as Instinet are upbeat on the prospects for such trading venues in Japan.  

It is believed Citi's internalised pools are among the biggest operating in Asia, from a broker-dealer perspective. Valentine says that last month trading on the Australian platform hit a record A$220 million on one day.

Trading in Asia is evolving, and fragmentation is coming whether the market likes it or not, says Valentine. Competition is good for the market, he adds, and Asia is bound to follow US and European models, in which dozens of dark pools, both internalised-broker platforms and external venues such as Liquidnet, provide alternative trading venues to exchanges.

Valentine, along with his boss Paul Sanger, pan-Asia head of execution services, have been in charge of aggregating Citi's in-house liquidity into internal dark pools over the past few years.

Citi now has dark pools operating in Australia, Europe, Hong Kong, Japan and the US. It has spent a lot of time bringing together liquidity across its cash, portfolio-trading and electronic-execution desks into a central location in the form of Citi Match, says Valentine. It provides clients with a deep, diverse pool of non-displayed liquidity, he says.

Behind the scenes, regulators are scrutinising many of these new developments, and exchanges such as Hong Kong's, have also aired their worries. Some are concerned about whether retail investors understand how dark pools work and what the risks of using them are. Regulators are specifically looking at whether more dark pools will disadvantage retail investors, an issue of particular significance in markets with a high proportion of retail investors, such as Australia, Hong Kong and Japan.