(Pictured: Tony Booth)
The annual survey by Liquidnet of traders at asset management firms around the world, published last week, shows a major concern about liquidity to cover an anticipated increase in global investment flows. The flows are mainly expected into the US and EMEA (Europe, Middle East and Africa).
The survey of 115 buy-side equity traders showed that 84 per cent were either ‘concerned’ or ‘very concerned’ about being able to source liquidity in the current market.
Liquidnet is a global institutional trading network covering more than 770 asset managers and other investors through discrete/block trading.
Another interesting finding was that high frequency trading (HFT) remained a key concern for equity investors worldwide. A total of 76 per cent believed that HFT negatively impacted some of their orders and 88 per cent were concerned about ‘predatory traders’ in some dark pools. The number of dark pools or other trading venues in the world, however, was predicted to decline by 33 per cent in 2016.
Tony Booth, head of EMEA sales at Liquidnet, said: ““Conflicts of interest exposed over the past year have been a real eye-opener for the buy-side and this has led to greater scrutiny of trading venues. What has become apparent in this process is that only a handful of venues can provide the trust, transparency and liquidity that the buy side needs to deliver performance.”
He said preserving alpha remained a priority for institutional asset managers, with the majority citing the ability to source block liquidity as a key factor impacting best execution, followed by information leakage and venue and liquidity fragmentation.
The respondents had a very low level of confidence in the regulators’ ability to make decisions which improved the structure and efficiency of the markets. For instance, fewer than 10 per cent of the US firms surveyed had confidence in the SEC’s ability to make decisions that would positively impact market structure. In EMEA, fewer than 4 per cent of the firms surveyed had confidence that MiFID II would have a positive impact.