The Singapore Exchange (SGX) and Chi-X have signed a heads of terms agreement to develop and launch Asia Pacific's first bourse-backed dark pool.
An implementation team has already been formed for the 50:50 joint venture, with trading set to begin in the first half of 2010.
The non-displayed platform aims to initially offer block crossing facilities for equities listed on SGX, and on an offshore basis for the Australia, Hong Kong and Japan exchanges.
The Chi-X Global Technology subsidiary will provide the technology for the platform. SGX-listed stocks will be cleared and settled through the exchange's securities clearing house and depository, via its members. The JV intends to appoint a pan-Asian central counterparty to clear other trades executed on the dark pool.
John Lowrey, CEO, Chi-X Global, says: "Our experience has shown that users are looking for independent, genuinely neutral dark pools with high functionality and deep liquidity, and we believe that this joint venture will be able to deliver just that."
Gan Seow Ann, head of markets, SGX, adds: "SGX is pleased to offer Asia the first exchange-backed dark pool, which will complement exchange trading by reducing the market impact of large trades. We believe it will be an important block trading venue for Asian markets, attracting new participants and improving the trading environment in the region."
Although not as prevalent as in the US or Europe, dark pools are becoming increasingly popular in Asia. With trading volumes falling across the region, alternative pools are seen as an attractive, and cheaper, way of dealing in large blocks of shares without moving the market too much.
In May Swiss bank UBS outlined plans to launch its Price Improvement Network (Pin) dark pool trading venue in Hong Kong, following in the footsteps of Goldman Sachs, CLSA, Instinet and Investment Technology Group, which all run platforms there.