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According to new research published today by TABB Group, “Asian Equity Trading 2009,” electronic trading revenues are forecast to drop significantly across the Asia-Pac region in 2009 to $815 million, down 16.9% from $981 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.
“In the second half of 2008,” says Matt Simon, a TABB Group analyst and author of the report, “there was a significant pullback leading into the first quarter of 2009. Traders saw liquidity sink.”
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. Simon supports his analysis in this 20-page report with 28 detailed exhibits that began with interviews conducted during March 2009 with heads of electronic trading from 11 of the top global broker-dealers. 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, Simon asserts that “global expansion is upon us and the Asia-Pac region is no exception.”
“2008 into 2009, however, has been especially tough for Asia’s brokers as a whole,” he says, explaining that 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.
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
This TABB Pinpoint is the third in a new series of research reports covering specific industry projections. Its 28 charts include: percentage of order flow from foreign versus domestic investors; low-touch as percentage of value traded by country; low-touch annual e-trading revenues by country; low-touch versus high-touch rates in basis points; high frequency rates in basis points; how will commission rates change over the next two years; percentage of clients using Order Management (OMS) and Execution Management Systems (EMS); buy-side TCA adoption rates; percentage of value traded matched off-exchange; average commission rate for crossing in basis points; and percentage of algorithmic flow by strategy type.
The report can be downloaded by TABB Group Research Alliance Equity clients and pre-qualified media at https://www.tabbgroup.com/Login.aspx. To purchase the TABB Pinpoints Asian Equity Trading 2009 report, go to http://www.tabbgroup.com or write to info@tabbgroup.com.
