Fund managers look to alternatives
With trading costs bearing down on them, UK fund managers are tentatively exploring the savings offered by alternative trading venues.
THE NEXT FEW months will be an exciting time for European alternative trading venues. With a March deadline looming, UK fund managers and brokers will be examining these systems more closely as they work hard to show progress in implementing recommendations on transaction costs made in the Myners Report.
Among other things, the 2001 report of Paul Myners' review of institutional investment for the UK government enjoins fund trustees to call their fund managers to account for their choices of trading methods and venues. The choice of alternative trading venues is expanding and differentiating between them and deciding when and how to use the different strategies they offer is a challenge for managers.
The proportion of trading conducted over alternative venues in Europe is still small but it will undoubtedly grow as the Myners recommendations force investors and brokers to focus more closely on transaction costs related to market impact rather than commissions.
Liquidnet, which launched in Europe at the end of November 2002, is the newest alternative venue available for European equities trading. The company, which first launched in the US in April 2001, operates an innovative order-matching system that exclusively serves buy-side institutions. Liquidnet connects directly to the order management systems of buy-side firms and continuously scans for potential matches between clients.