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Institutional traders look to Asia, but lament equity market fragmentation

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  • Institutional traders look to Asia, but lament equity market fragmentation

GLOBAL - Traders for institutional investors face an increasingly challenging environment in Europe and are looking more and more to Asia for better opportunities, a new survey by Liquidnet reveals.

Only 14% of European traders surveyed by Liquidnet see European markets as attractive, while more than half (58%) believe China offers the most potential.

Seth Merrin, chief executive at Liquidnet, said: "Many of these traders, who have a front-row seat to the global markets on a daily basis, see significant investing opportunities in many of the more rapidly growing economies outside of their own backyard.

"The opportunity to open up these trading opportunities around the world will help create a more efficient market for all traders."

Survey respondents also expressed concerns over the scarcity of liquidity for block trades.

Last month, IPE reported that institutional investors buying and selling equities in large blocks were facing a challenging trading environment due to equity market fragmentation.

Adrian Fitzpatrick, head of investment dealing at Kames Capital - formerly known as Aegon Asset Management - said: "The market is becoming more and more fragmented, and we absolutely need to reappraise what institutions are doing.

"Currently, it is too risky to trade a large amount at the same time, so asset management firms prefer to trade several smaller amounts."

The survey also shows that 80% of traders believe the biggest hurdle to achieving the best price in equity trades is finding liquidity for executing transactions of large blocks of stock.

Merrin said: "It is critical that traders be able to access institutional-sized liquidity in high-growth markets throughout the world so they can deliver better performance to their investors."
 

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