* Taiwan stocks added to Liquidnet’s Asia dark pool platform
* Investors able to trade blocks of Taiwan shares off-exchange
* Taiwan main index up 6 percent so far this year
HONG KONG, March 22 (Reuters) - Liquidnet, a New York-based operator of off-exchange share trading platforms known as ‘dark pools’, is set to begin trading Taiwan stocks on Tuesday, expanding into its 12th market in Asia-Pacific.
The launch highlights growing demand from institutional investors to trade large blocks of shares off-exchange amid increased volatility and thin liquidity on the region’s main exchanges, despite a number of dark pool scandals.
Dark pools are attractive to investors because they often offer better deals in terms of pricing than traditional exchanges, and allow fund managers to conceal their trading intentions when placing large orders.
Foreign investor interest in Taiwan has also been rising over the past two months following January’s national elections, with the Taiwan Stock Exchange Weighted Index up nearly 6 percent this year.
“There were concerns around the elections and the economy, but that has calmed down and it seems to us that Taiwan is looking like a good story,” Lee Porter, head of Liquidnet Asia Pacific, told Reuters in an interview.
He added that recent changes to Taiwan’s settlement system had also made it easier for foreigners to access the market.
Dark pools are trading platforms operated by broker-dealers that allow investors to buy and sell shares anonymously, with prices displayed after a transaction has taken place.
Liquidnet allows institutional investors and fundamentals-driven hedge funds to anonymously trade very large blocks of shares - each trade averaging around $1.8 million in value - by matching-up buyers and sellers across its network of 800 clients. It is one of the biggest dark pool operators in Asia Pacific.
Dark trading is still in its infancy in Asia-Pacific due to market structure constraints, with Hong Kong, Australia and Japan having the lion’s share of dark liquidity in the region.
Broker-run dark pools have attracted intense regulatory scrutiny after operators in the United States allowed sophisticated high-frequency trading firms to take advantage of traditional investors.
The scandals have prompted regulators in the U.S., Europe, Hong Kong and Australia to tighten-up their dark pool rules, and have seen investors become more cautious over who they do business with, said Porter.
“Certainly, asset managers are a lot more picky as to who they interact with these days.” (Reporting by Michelle Price; Editing by Edwina Gibbs)
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