Investment Technology Group Inc., which in 1987 started one of the earliest U.S. venues for matching stock orders away from an exchange, has expanded its platform to Mexico.
ITG’s Posit Alert will provide fully electronic bulk trading in Mexico as the company expands the product into Latin America, according to a press release today. Known as a block crossing system, it will anonymously match large buy and sell orders between money managers.
The move by ITG highlights efforts by U.S. trading firms to expand into international markets as volume drops at home, with the average daily number of shares traded falling to 6.4 billion this year from about 9.8 billion in 2009, according to data compiled by Bloomberg. Mexico is the fourth new country for Posit Alert in the past year, and New York-based ITG plans to eventually offer the product in Brazil.
“We’re trying to complete every relevant global market,” Jamie Selway, managing director and head of electronic brokerage and sales at ITG, said in a telephone interview.
Selway said there are about five more markets that ITG would like to make available on the platform. ITG expects most of the trading of Mexican stocks to be in companies in the financial, basic material, energy and consumer cyclical industries.
Mexico permits trades of local companies’ shares to be executed in the “dark,” or without revealing the identity of the buyers and sellers. ITG said firms use POSIT Alert to maximize their chances of finding liquidity and reduce the market impact of their trades.
“It’s the only Latin American country to allow dark liquidity to exist,” said Danielle Tierney, an analyst at Boston-based Aite Group, in a phone interview. “The product to first capture that need is going to be very important and will have a foothold in the region.”
That foothold could help if Brazil changes its rules to permit dark trading, said Tierney, though she added there are no indications such changes are imminent.
Mexico is the second-largest stock market in Latin America, with a total equity capitalization of $518.5 billion compared with $973.7 billion in Brazil and $20.1 trillion in the U.S., according to data compiled by Bloomberg. Mexico’s IPC Index is down 7.7 percent this year, compared with a 19 percent decline in Brazil’s Ibovespa.
Selway said ITG would like to expand Posit Alert to Brazil once regulations allow. The company started Posit Alert for Indonesia in August 2012, Malaysia in December and Singapore in May. ITG booked about 64 percent of its revenue in the U.S. last year, down from about 75 percent five years ago, data compiled by Bloomberg show.
Posit Alert’s system matches institutions seeking to carry out large trades, an increasingly rare occurrence in today’s U.S. market where the average trade size is about 300 shares, according to data from ITG. Average trade size on Posit Alert in the U.S. was 32,000 shares in May, according Rosenblatt Securities Inc. The Posit platform accounted for 0.73 percent of average U.S. daily trading volume that month, said Rosenblatt, and 30 percent of that volume was Posit Alert.