SINGAPORE (March 6): Dark trades, which refer to trades executed off-exchange – for instance, married trades – may have eased off in the Singapore equity market last year.
But Liquidnet, the only non-proprietary dark pool operator in Singapore, has seen growth in dark trades.
In 2019, Liquidnet’s dark trades surged 35% y-o-y to US$1.9 billion ($2.63 billion).
“This was driven by a growing base of institutional investors, including hedge funds, pension funds and sovereign wealth funds,” Angela Leong, head of Liquidnet’s Singapore office, tells The Edge Singapore in an interview.
She adds that a low base also helped.
By comparison, the total volume of married trades in Singapore fell 15.9% y-o-y to 10.78 billion shares, according to data by the Singapore Exchange.
The total value of married trades in Singapore declined 21% y-o-y to $17.89 billion.
For perspective, these figures comprised 3.6% and 6.7% of the volume and value of on-exchange trades in Singapore, respectively, last year.
On the broader front, Liquidnet saw y-o-y volume growths of 18% and 24% in Hong Kong and Australia, respectively, in 2019.
In Indonesia, the dark pool operator also registered y-o-y volume growth of 26%.
Overall, Liquidnet’s dark trades grew 9% y-o-y to a “record” US$59.8 billion across 13 markets in Asia Pacific.
Leong says most of the large blocks of dark trades in Singapore are consumer and banking stocks, as well as real estate investment trusts.
Last year, The Edge Singapore in issue 907 reported that dark trading can improve on-exchange liquidity, especially for illiquid, and small- and mid-cap stocks.
A white paper published by the Monetary Authority of Singapore last year said that the presence of dark trades encourages the entry of investors, who would otherwise not be willing to trade on traditional exchanges due to the price impact of their large trades.
Also, market participants will eventually become aware that there is trading interest in those securities, and such increased trading volume may generate further trading interest, the paper said.