BNP Paribas Decides To Shift Its Asian Equity Operations To Instinet

French bank BNP Paribas is set to outsource its equity trading operations to Instinet, the electronic brokerage, signalling a cutback in its participation in the Asian markets.

BNP Paribas currently has operations in 16 Asian markets including cash equity trading operations in Hong Kong, Singapore and Tokyo.

BNP will replace its current electronic cash equities technology platform with a trading system provided by Instinet resulting in reduction of IT and operational costs. BNP earned more than €2.7bn in revenue from its Asian operations during 2014.

In a statement, a spokeswoman from BNP Paribas said

This decision was made to ensure BNP Paribas clients benefit from a cash equities offering that is executed on a scalable best-in-class trading system, without having to invest internally in the infrastructure to build it.

Instinet, an US based brokerage agency, was founded in the 1960s and is currently owned by Japan’s Nomura. In 2005, its successful electronic stock market was merged with Nasdaq.

Instinet’s platform fills client orders at the lowest price automatically and in the fastest way possible. This is much more efficient when compared to the traditional model where a dealer first buys into a position from a client and then attempts to sell it back to the market for a profit.

The global head of broker dealer strategy at Instinet, Joel Hurewitz stated that the firm is constantly seeking opportunities to partner with broker-dealers to offer efficiencies and benefits to clients via their platform.

Sources with knowledge of the matter have said that this shift is expected to deliver significant reduction of costs in the back-office processing of orders and management of BNP operations.

Many of the Western banks, who had entered Asian markets before the financial crisis are now pulling back as a result of losses arising due to fierce competition from local rivals and the low margins in these markets.

According to sources, the trading platform is expected to be launched in Japan next month and then in Hong Kong by June. Other Asian markets are scheduled to be covered in the second half of the year.

Also as a part of the review of its operations, BNP closed operations of its “dark pool” platform in Japan. Dark pools are off-exchange anonymous trading markets which allow investors to trade large share blocks with the transaction price being disclosed only after the trade. This pulling out by BNP makes it among the first global banks to withdraw from the dark pools market. Hong Kong’s financial regulator fined the bank HK$15 million in 2015 for violating the rules for dark pools.

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