Published On: Tue, Apr 26th, 2011

Asian Banker Market And Exchange Awards Poorly Chosen

Asian Banker Market And Exchange Awards Poorly ChosenThe Asian Banker held their Market and Exchanges Award 2011 recently and the winners were somewhat surprising and a little perplexing.

First of all the Alternative Exchange of the Year Award went to Chi-X Asia Pacific. We didn’t think that choice was a good one. Don’t get us wrong Chi-X has shown a great result in Japan and is starting to ramp up business with Chi-east in Singapore but to bestow this accolade when these venues are just nine and five months old, respectively, overlooks the hard work and success of Asia’s other alternatives. SBI Japannext (SBIJ) has been operating for a few years now and has, with Kabu.com, been tirelessly lobbying the Japan FSA to make the PTS framework more competitive. They have had some success with changes made at the JSCC, for example, to finally allow central clearing for PTSs in Japan. The Asian Banker cites “Chi-X has rapidly built its trading platform in Asia Pacific with impressive business performance in trading and revenues.” Asia watchers will know that Chi-X in Hong Kong was an administration office that has all but shut with the departure of Ron Gould and Chi-X Australia is patiently waiting to do its first trade now expected to be Q4 of 2011. The only really impressive business performance is in Japan where it has now overtaken SBIJ. Chi-X would probably be a good choice next year but giving them an award like this now is premature.

The Buy Side Trading System of the Year as chosen by Asian Banker was ITG. ITG??? Are you sure about that? Granted, Triton is a good product and has won awards in the past (Asian Banker gave them the same award last year) but there are so many other Buy Side Trading systems now in Asia from vendors who have had great success this past year. Charles River, for example, is one of them breaking into China and expanding across Asia. Fidessa is another that has been executing contracts all over APAC. There are several others such as Eze Castle, Linedata and Sungard. I don’t know exactly the reason why ITG was chosen but apparently an “International jury uses comprehensive selection criteria”. Maybe renaming the award as “Agency Broker Buy Side Trading System of the Year” would make more sense.

The Korea Exchange won both The Exchange of the Year and Financial Derivative Exchange of the Year. The Asian Banker concludes “Korea Stock Exchange has demonstrated sound business performance with a strong capital raising position and derivatives trading venue.” The KRX has long been the largest index options trading venue by volume in the world. The large increase in derivatives trading in Korea last year was for two reasons. The first was the specter of war as the North had sank a South Korean ship and shelled a disputed island along the Demilitarized Zone. These acts of aggression caused a spike in volatility in the index and options and drove trading records in Korea. Nothing to do with any superior business practices or technical superiority. The second was the growth in securitized derivatives in Korea which grew almost 100% in terms of listings which did indeed lead Asia but due to the small notional size inflated its volume numbers. It’s like the Multi-commodity Exchange’s recent launch of the 1 gram gold futures contract. You can bet that the turnover numbers at the MCX will be widely trumpeted and produce the largest gold trading market in the world. Perhaps even a finalist for the Asian Banker next year. KRX is indeed a good solid exchange but in our view better choices for that award such as the NSE or BSE, ASX, SGX or TSE in terms of building world class trading venues, offering growth in derivatives and equities trading and reinventing themselves for trading in the 21st century.

Algorithmic Trading System of the Year was given to Nomura. The details of the selection were not known but we have to be skeptical when considering the likes of Flex Trade or Progress in Asia. Was the selection made on the number of algos available, quality of Nomura’s algo execution or even customization of those algos? Were they even sell side algos at all? A bit more clarity is needed on the criteria for selection of this award. Nomura has a great franchise but an Algorithmic Trading System of the Year award seems rather ambiguous.

We thought the choice of Liquidnet as Dark Pool of the Year made sense. Despite the negative perception these venues are held in, dark pools serve a certain type of buy-side who is seeking a lot of liquidity anonymously and at a fair price. While they have morphed to allow smaller order sizes even 1 lot trades from internalizers the original intention of non-display trading is for very large blocks of stock and Liquidnet is really the only true darkpool averaging around 1.4million USD per trade in Asia.

Other awards were Data Provider of the Year Bloomberg and The Equity Markets Exchange of the Year Shenzhen Stock Exchange.

We have no doubt there was a “rigorous selection process” but AsiaEtrading is having a hard time reconciling the results. It is there awards and they can give them to anyone they choose but It seems AsiaEtrading will have to offer its own awards and try to set the record straight for Asia’s electronic trading industry achievements.

We would be interested to hear your views on Asian Banker choices for the winners.

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  1. Vanessa Wall, Nomura says:

    Thought I would clarify in reference to the suggestion that Nomura’s Algorithmic Trading System of the Year award seems rather ambiguous.

    The “Trading System” in question refers to Nomura’s ModelEx. ModelEx is live in Japan, Korea, Hong Kong, Taiwan, Singapore, Australia, India, Indonesia, Malaysia, and Thailand and offers a full suite of Core, Conditional, Tactical & Customized Algos (as well as Pairs & Portfolio Cash Balance).

    The Asian Banker criteria for the awards was quite specific – they were looking for performance vs. benchmarks, sophistication, customization, differentiation as well as the supporting products and services that are closely tied to supporting ModelEx.

    The criteria also incorporated logic underlining the core algo engine, the ability to test various strategies, the uniformity with which clients can access the varying markets within Asia and Globally, market share, the growth & volume in NX (Nomura’s Dark Pool), recent innovation & new products, the sophistication of its Smart Order Router, the depth of the Quant Analytics team and top ranked Quant Research.

    Hope this provides some clarity on the ambiguity.

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