Dark-Pool Firm Started by Bankers to Enter Hong Kong and Japan

  • Former Citi, UBS trader Richard Macfarlane heads Asian growth
  • Sydney’s Block Event also going into Indonesia, Philippines

Block Event, an Australian equity-trading venue run by a former Credit Suisse Group AG trader, will expand a business that combines the attributes of a dark pool and a sales desk into Hong Kong and Japan by the end of the year.

Founders David Klinger and Phillip Weinberg hired Hong Kong-based Richard Macfarlane, a 51-year-old veteran of Citigroup Inc. and UBS Group AG, to begin trading in four Asian markets including Indonesia and the Philippines, Klinger said in an interview. Sydney-based Block Event aims to hire local language speakers in Hong Kong, Japan and India as it grows, he said.

Dark pools have proliferated in the past decade and become popular with large money managers who want to keep their trading private. While they don’t show users what others are doing, dark pools allow indications of interest, or messages that let computers know of trading intentions within the venue to solicit new orders.

“Business is really starting to get some traction,” Klinger said Wednesday in Sydney. “You start off and a lot of people say it sounds interesting but sit on the sidelines until things get going. Now a lot of those are coming on board.”

Trading on private venues varies hugely across Asia. Dark pools accounted for about 1.6 percent of the Hong Kong securities’ market turnover in June, according to data from the city’s stock exchange, while between one-quarter and a third of equity trades in Australia now occur away from exchanges, the nation’s securities’ regulator estimates.

Removing Conflict

Klinger, who set up Credit Suisse’s algorithmic trading platform and broker dark pool, founded the firm with Weinberg in 2014 and began as a trading venue for Australian equity block trades this year. Anthony Jav Brown, who spent nearly two decades at Deutsche Bank AG, most recently as head of facilitation and trading across Asia and Australia, joined Block Event in June as head of sales.

Block Event’s Asian expansion is in the hands of Macfarlane, who joined in July and says he was attracted to work at a firm not owned by a large investment bank. In the past, he ran pan-European sales trading at UBS and equities businesses across Asia, India and Southeast Asia. He expects to launch trading for Block Event in Hong Kong, Japan, Indonesia and Philippines later this year.

“I’ve never had meetings without the fear of conflict,” Macfarlane said. “I’ve removed the conflict that is a bulge-bracket firm. I’m quite happy to sit on my own in the office because people ring me and they’re happy to support us 100 percent.”

Block-Size Trades

By targeting large trades, Block Event is going head-to-head with firms such as Investment Technology Group Inc. and Liquidnet Holdings Inc., both based in New York, as well as many of the world’s major investment banks, which operate private stock-trading venues.

Block Event concentrates on block-size trades, which it defines as those larger than 10 percent of an equity’s average daily turnover. The firm traded a record A$100 million ($76.7 million) worth of stock on its Australian platform last week and has an average trade size of A$1.6 million, Klinger said. That compares with an average trade of A$2,727 on ASX Ltd.’s Centre Point system, the nation’s largest dark pool, that handled more than A$7 billion of transactions in July, according to most recent data.

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