New buy-side to buy-side trading venues
must adopt a wider ranger of market participants than long-only active managers
if they are to succeed, leading figures have warned.
Speaking at the TradeTech Conference in Paris,
Martin Henning, head of trading at BNY Mellon, said it was important that new
initiatives designed to resolve liquidity problems had a multitude of traders
with different objectives.
He said: “The problem with the buy-side to
buy-side concept is that if you are on a momentum play and there are only [long-only] buy-siders in there, where does the liquidity come from? We need brokers
to interact.”
Henning’s comments were endorsed by industry
heavyweights Adam Toms, chief executive of Instinet Europe and Brian Pomraning,
head of electronic client solutions at JP Morgan.
Toms said venues need to monitor the liquidity
sources in their pools to ensure there was sufficient “uncorrelated
liquidity”, while Pomraning said without critical mass venues cannot
succeed.
Toms explained: “It is very important that
you have that uncorrelated liquidity. Turquoise Block Discovery already
has a lot of the answers. But clients and brokers need to get behind that
initiative properly. We need to question ourselves about how we operate.
“I am a bit relaxed about Plato as
to why it is any different, when you already have a service in Turquoise Block
Discovery. It is pretty independent, in that it is owned by the LSE. Why can’t
we make Turquoise Block Discovery our focus?”