TP ICAP has detailed its plan for Liquidnet less than three months after the London-based broker bought the $700 million (£504m) equities market, suggesting credit trading, new protocols and the inclusion of dealer liquidity are among its priorities.

Speaking to Global Investor less than 90 days after TP ICAP completed its acquisition of Liquidnet in late March, Joanna Nader, Group Head of Strategy at TP ICAP, said Liquidnet is a market-leader in low-touch cash equities block execution for 1000 of the world’s top asset managers and hedge funds.

Nader, who joined TP ICAP in October 2019 from RBC Capital Markets, said the LSE-listed broker is keen to build on Liquidnet’s equities franchise partly by diversifying into fixed income.

She said: “Electronic trading in equities is much more mature than electronic trading of corporate bonds. There are a lot of choices for executing electronically in equities. In contrast, in credit, three large platforms account for the bulk of electronic trading volume – Bloomberg, MarketAxess and Tradeweb.”

Nader added: “In terms of order flow, we believe Liquidnet ranks a strong fourth in the market, with 500 of the largest buy-side asset managers connected to the platform connected via their order and execution management systems. This level of connectivity with large buy-side players makes Liquidnet a rare platform.”

Nader said that, while Liquidnet’s trading tools are well suited to fund managers handling blocks of equities, bonds work differently.

“Our plan is to evolve the traditional platform to improve client matches as well as broadening the suite of trading protocols, in order to give that large network of clients more execution choices,” the Group Head of Strategy said.

For John Ruskin, TP ICAP’s Chief Executive Officer of Agency Execution, the plan is partly around building on the established Liquidnet service through complementary products.

“Liquidnet is a trusted brand, which is important, and it is market-leading provider of block trading but there are some obvious adjuncts that are needed before it could be considered a full service player. As well as fixed income, we think there is an opportunity to, in time, make futures and options available as well as cleared interest rate swaps and foreign exchange.”

TP ICAP said it is also keen to offer Liquidnet’s core buy-side users access to a greater range of liquidity sources, including TP Icap’s traditional dealer clients.

Nader said: “In conjunction with introducing a wider range of trading protocols, we also want to give buy-side traders of credit more access to dealer liquidity and prices via the Liquidnet platform. TP ICAP has strong long-term relationships with the largest global dealers, and we are already actively engaged with the sell-side community, who are keen to see Liquidnet broaden its capabilities.”

Historically, Liquidnet has focused on the key equities markets but hasn’t fully explored some other regions, according to Ruskin who said that TP ICAP’s broader international coverage will open up new opportunities.

“TP ICAP brings with it some distribution opportunities. Liquidnet doesn’t have a sales presence in Paris for example whereas TP ICAP does and we see an opportunity in Asia where we will be able to use TP ICAP’s established presence across the region,” said Ruskin.

Nader added that the Liquidnet acquisition and TP ICAP’s plans to develop the service further also fit with a secular shift in the inter-dealer broker business as more markets come to rely on screens rather than voice brokers for prices. 

Liquidnet offers a range of trading algorithms, largely for managing the execution of block trades, and this is a service that TP ICAP is keen to develop further.

Nader said: “We are trying to make more of our traditional broking business low touch. However, we want to achieve this by giving our clients more low touch execution options, and making it attractive for them to execute electronically.”

The TP ICAP head of strategy said the inter-dealer broker market has not had a regulatory incentive to move to screens, unlike fund managers for example.  

“Rather, the shift to low touch that we want to encourage will be driven more by economic incentives, and by efficiency considerations. However, we are not going to be prescriptive with our clients about how much business is done in a particular way."

Nader also believes there is a cultural shift in the way traders are handling orders.

“We do think our electronification strategy in our traditional broking businesses will be helped by a generational change that has been taking place; younger traders are happier working in a low-touch environment. These traders want more information delivered electronically, and more low touch tools.”

Nader concluded: “Our strategy is about evolving our offering to ensure we cater for our client’s changing requirements.”