Liquidnet could get half of sales from overseas

NEW YORK (Reuters) - Liquidnet, the dominant electronic marketplace serving buyside trading firms in the United States, sees European and Asian markets making up half of its business within three years.

Speaking at the Reuters Exchanges and Trading Summit in New York, Liquidnet Chief Executive Seth Merrin said the recently deregulated European market -- where Liquidnet is now the No. 3 agency broker on the London Stock Exchange -- and Asia, where Liquidnet launched in November, still both have enormous growth potential.

Based on the privately held New York-based company's experience in its home market and in Europe, where volumes only really picked up after three years, Merrin predicted it would take a similar amount of time to reach critical mass in Asia.

Merrin told Reuters during a previous interview in March that he was confident the marketplace would go public by year-end.

At the Reuters Summit on Tuesday, Merrin said he believes the recently enacted European Union Markets in Financial Instruments Directive, known as MIFID and designed to liberalize European financial markets, will open up the European market in the same way a similar reform did in the United States.

Thanks to the U.S. rule known as Regulation NMS (national market system), there are now some 41 of the off-exchange trading venues known as dark pools operating in the U.S.

"Think of how archaic this industry is," he said, adding that traditional exchanges worldwide still exist today only because they are mandated monopolies. He predicted they would continue to lose business to dark pools.

In Asia, where Liquidnet is still a minor player, the company's liquidity has been growing at a rate of 30 percent, month-over-month.

The company, which average 56,000 shares per executed trade, will follow the same model in developing its overseas business.  Continued...