Liquidnet looks beyond automation for equity block trades
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Liquidnet looks beyond automation for equity block trades

It is getting tougher for investors to execute block trades of more than €2 million in Europe’s fragmented equity markets. Matching buyers and sellers needs a return to negotiation and away from pure electronic trading.

Photo: iStock

Equity block trading has come under intense scrutiny this year, after Morgan Stanley paid $250 million in January to settle charges relating to a former head of US equity syndicate. He had leaked confidential information on forthcoming block sales to potential hedge fund buyers, who then drove down the price against the sellers by going short, knowing they could cover their positions through the coming block on favourable terms.

But it had long been known that the investigation was progressing, and the outcome hasn’t damaged the business.

On the evening of June 4, Morgan Stanley, together with JPMorgan and Deutsche Bank, took on from KfW a €2.43 billion block of shares in Deutsche Telekom and sold them in a matter of hours at a tight 2.25% discount to the closing price. That trade followed large block sales in May, coming from corporate, state and private equity vendors, of shares in Haleon, Eni and London Stock Exchange Group.

Confidentiality remains important to sellers who want to avoid the price impact of information leaking on big sales. But the potential supply is often priced in on these kinds of big blocks that are handled by equity capital markets teams at the big banks.

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