1. Electronic Trading Trends and
Fragmentation in Asia Pacific
Oct 2010
Hani Shalabi
Head of AES Asia - Credit Suisse

2. Agenda
High Frequency Trading
Electronic Trading: Advanced Execution Services (AES®)
Internalization Engines/Dark Crossing: Crossfinder™
Smart Order Routing: Pathfinder (SOR)
2

3. High Frequency Trading
Who Are They? What Do they Do?
Market Making (Spread
Capture)
Used to be secret Index Arbitrage
Now household names
Market Neutral
Statistical Arbitrage
Trend Following /
Reversion
3

4. High Frequency Trading
Asia vs. Rest of the World
High Frequency (% of Total Market Volume)
Japan: 30%
Australia: 15%
HK, Singapore,
Taiwan, Korea: <10%
Others: <3%
Source: Credit Suisse 4

5. High Frequency Trading
Market Heat Map – barriers to entry
Source: Credit Suisse 5

6. High Frequency Trading
Trading Costs - roundtrip
Source: Credit Suisse, Exchanges, Alternative Venues 6

7. High Frequency Trading
Abusive Practices
Flash Orders
Order ID Information Leakage
Use of certain order types to detect hidden liquidity
Quote Stuffing
Crowding the book
7

8. High Frequency Trading
The Case of Japan: Trading By Investor Category
Source: TSE 8

9. High Frequency Trading
The Case of Japan: Trading Characteristics
Source: TSE 9

10. High Frequency Trading
The Case of Japan: Order Book Volatility
Source: TSE 10

11. Algorithmic Trading

12. Algorithmic Trading
Global Trends
Source: Credit Suisse 12

13. Algorithmic Trading
Client Venue Usage
Japan has the
highest electronic
trading usage
Hong Kong is a
distant second
followed by Australia,
Korea and Taiwan
New markets like
India are on the rise
Source: Credit Suisse 13

14. Algorithmic Trading
Strategy Description
Smart DMA Pairs
VWAP Gamma
Percent of Volume I Would
Multi level POV Close
Implementation Shortfall
Custom1
Float
Custom2
Iceberg
….
Sniper
Custom140
Sector/Index Relative
Dark Pool Only
14

15. Algorithmic Trading in India
Growing Fast
Source: Reuters 15

16. Algorithmic Trading
Upcoming Trends
Sophisticated customization
Co-locating latency sensitive strategies
Algo protection against sudden price / order book
(Fair Value Limits)
Taking advantage of exchange driven new order types
Source: Credit Suisse 16

17. Darkpool Crossing

18. Crossfinder ™
Venue Size
18

19. Smart Order Routing

20. Smart Order Routing
Fragmentation in Japan
20

21. Smart Order Routing
Liquidity at Alternative Venues Strikes Back
Source: Credit Suisse; Bloomberg 21

22. Conclusions
Fragmentation is starting to take off in Asia but has a long
way to go
HFT and trading costs will increasingly be the focus
Trading stock manually is getting more difficult
Traders regard access to cutting edge technology and
smarter algos as core competency
Source: Credit Suisse; Bloomberg 22

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