According to new research published by TABB Group, Asian Equity Trading 2009, electronic trading revenues are forecast to drop significantly across the Asia-Pac region in 2009 to USD815 million, down 16.9% from USD981 million in 2008.
This follows a 17.7% decrease in institutional value traded from 2007 to 2008, a year-over-year drop that has affected overall trading strategies across Asia.
The TABB Pinpoints research report covers institutional equity trading across Japan and five other major Asian markets, examines trends in electronic trading and provides the industry with an in-depth analysis of topics affecting traders and dealing desks. After analyzing the detailed country-by-country breakdown of low-touch order flow in the six major markets of Asia – Japan, Hong Kong, Korea, Australia, Singapore and Taiwan to off-exchange crossing, commission rates, technology and connectivity, Matt Simon, a TABB Group analyst and author of the report asserts that global expansion is upon us and the Asia-Pac region is no exception.
Other key findings from the TABB Pinpoints report include:
-Buy-side firms have returned to VWAP/TWAP strategies amidst current volatile market conditions,
-Dark pool adoption in Asia is taking longer to develop than in the US and Europe, leading TABB to estimate that 3.5% of value traded will be matched off-exchange in Japan by 2010, 1.5% in the five other market centers,
-Commission rates remain steady but increased competitive pressure is driving them down,
-Demand for Transaction Cost Analysis (TCA) is increasing with 35% of buy-side firms using some type of independent TCA,
-Global expansion is driving connectivity to new markets such as Malaysia, Thailand and Indonesia.
In the second half of 2008, says Matt Simon. There was a significant pullback leading into the first quarter of 2009. Traders saw liquidity sink. 2008 into 2009, however, has been especially tough for Asias brokers as a whole.
Just as electronic trading was taking hold, many hedge funds were forced to curtail electronic strategies or simply shutter trading operations. US and European expansion globally has been restricted by budget cutbacks and unrealized opportunities since October 2008.
L.D.