Chi-X Japan, the Tokyo-based share trading platform owned by Chi-X Asia Pacific, is set to launch an anonymous off-exchange market known as a "dark pool" in a bid to grab more business from the Tokyo Stock Exchange ("TSE").
The launch, scheduled for 17 October, 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 in recent years.
Dark pools are share trading venues that allow investors to buy and sell shares anonymously, with prices displayed after a transaction has taken place.
They have grown increasingly attractive to traditional 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.
The dark pool, named Kai-X, will allow investors to anonymously trade shares at prices equal to or better than those available on the TSE, the company said on Tuesday, 4 October.
“This should deliver a number of advantages such as, limiting information leakage and facilitating the execution of large blocks [of shares]," Chi-X Asia Pacific CEO Tony Mackay said in the statement.
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.
Several global banks and brokers, including Credit Suisse, Instinet and ITG, already operate dark pools in Japan.
Bank-run dark pools have attracted intense regulatory scrutiny after operators in the United States allowed sophisticated high-speed trading firms to take advantage of traditional investors.
The scandals have prompted regulators in the US, Europe, Hong Kong and Australia to tighten-up their dark pool rules, while the Japan securities regulator has also been more closely scrutinising these venues, according to media reports.
Chi-X Japan was launched as a rival to the TSE in 2010 by parent company Chi-X Global, the international exchange operator whose Asian business was subsequently bought by private equity firm J.C. Flowers in January.
Since its launch, Chi-X Japan has grabbed only 1.5 percent market share from the TSE, according to the company's own data.