Buy-side trading platform Liquidnet saw global principal traded grow by more than 15% year-on-year in 2013 including strong growth in its European business, which increased by 59% from 2012.

The institutional liquidity network said building its international footprint outside of North America was key to its growth strategy and Liquidnet is now present in 42 markets globally.

Global principal traded hit US$470 billion, a 17% increase, while global average execution size increased by 15% to US$1.4 million.

However, the European business was the strongest market or Liquidnet, with a 59% rise in average daily principal traded and a 44% increase in average daily liquidity year-on-year. European average execution size also increased, approaching the levels seen in North America at US$1.3 million, a 28% increase from 2012.

Growth of Liquidnet’s continental European client base was particularly strong, with a 146% increase in trading from European institutions based outside the UK. There was also significant investor flows into Europe from the US, up 48% in Q4 2013 compared to the same period in 2012.

Liquidnet said it expansion of commission management services to new European markets played a key role in its growth in the region.

"Building out Liquidnet's global footprint to 42 markets has played a significant role in our success. While the bulk of investable assets are still held in North America, 2013 has marked a year in which these institutions have increasingly looked to diversify their international investment strategies," said Seth Merrin, founder and CEO of Liquidnet.

In the US, the platform continued to be a major block trading player, with members trading US stocks usually sitting as the first or second largest print of the day. Liquidnet also crossed its largest ever trade in 2013, trading 2.9 million shares in a US-listed stock worth a total of US$150 million.

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Last Friday, the Australian Securities Exchange’s (ASX) VolumeMatch service was officially discontinued, ending one of the ASX’s first forays into services intended to help it effectively compete in a multi-venue market since the launch of Chi-X Australia in October 2011.

A spokesman for the ASX commented via email that “ASX’s other and more recent anonymous execution services – Centre Point and Centre Point Block – have proved to better meet the needs of customers.”

Market participants had criticised the VolumeMatch venue for poor design.

“We never really looked at it,” commented one Australian head of trading who declined to be named so that he could speak freely. “There were no volumes going through it so we didn’t use it – there was never really any spark. You need more than a couple of buy-side guys to make a market.”

The trader said from the outset the system had been “cumbersome to get into”, and added that because of a lack of broker support, there was unlikely to be much impact on the market by VolumeMatch’s closure.

“Centre Point Block; this re-incarnation effectively replaces it anyway, but with a different mechanism this time,” the trader said.

Centre Point, anonymous mid-spread matching solution, was launched in 2010. Centre Point Block is a service to support users seeking larger block execution by letting them nominate a minimum fill size for their anonymous block order. It and a range of improvements to Centre Point were announced in June of 2012. Centre Point has enjoyed much more success than its predecessor, for example most recently seeing Morgan Stanley sign up to the service on 7 November, and securing a market share of 3-4%.

ASX’s spokesman noted the main differences between VolumeMatch and the Centre Point services include: VolumeMatch had an execution threshold of A$1 million, while Center Point has no threshold and Center Point Block has A$50,000. VolumeMatch was restricted to executing within revolving three-minute block periods with a static price, while Centre Point offers continuous execution at a dynamic price.

Chi-X declined to comment directly on VolumeMatch, but Jason Keady, director of markets and operations for Chi-X Australia, said his service was “not a dark pool, so we don’t view it closing down as affecting our business.  That aside, we are pleased with the market’s response to enhancements we made to the Chi-X Mid-Point order and trade reporting services.”

In terms of competition in the marketplace and whether more or less venues is better for customers, Keady said: “What is best for market participants is if they have a range of execution venues that allow their trading strategies to be implemented efficiently. One venue can’t meet the diverse needs of all participants. If venues are going to work, they need to deliver value for trading participants… In Australia, we still have a relatively small number of venues and no real problem with fragmentation. And we’ve seen the benefits of having competition in cash equities trading – price improvement opportunities for investors, lower trading fees, and innovation – that competition delivers.”

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Fears that broker crossing networks (BCNs) may be forced out of the market could be alleviated following the most recent MiFID II amendments tabled by MEPs.

Brokers had feared that the European Parliament’s Economic and Monetary Affairs Committee (ECON) was on track to outlaw BCNs, backtracking on proposals made by the European Commission in its initial October 2011 draft of MiFID.

The Commission wanted to bring BCNs under a new category known as the organised trading facility (OTF), that would also include new trading venues that emerge as a result of OTC derivatives legislation.

While supportive of the OTF regime for swaps, Markus Ferber, who is guiding the European Parliament’s review of MiFID II, has argued the new category for BCNs would only exacerbate fragmentation and “create new loopholes”.

In his amends, Ferber proposed reclassifying all BCNs as either multilateral trading facilities (MTFs) or systematic internalisers, thereby eliminating the ability for brokers to decide how they match orders in their venues.

But MEPs – who were required to table their amendments by 10 May – have given their backing to the OTF category for equities and have also put the issue of whether brokers should be allowed to include non client flow in their networks back on the agenda.

The Commission had initially stated that an OTF should not contain any non client flow at all because of the potential conflicts that can arise if a venue operator is allowed discretion over how it matches orders in a liquidity pool that includes its own flow.

Facilitating client flow

A number of MEPs, including Olle Schmidt and Kay Swinburne, have been in close consultation throughout the amendment process with the aim of presenting ECON with different options relating to how client facilitation flow in OTFs should be handled.

Swinburne has suggested that the use of proprietary capital in BCNs should be limited to those trades that can facilitate client-to-client transactions.

“We need alternatives to how proprietary trading is handled so that we have a spectrum of proposals that we can discuss in the compromise meetings,” Swinburne told theTRADEnews.com. “If it turns out that we do not have the OTF for equities and BCNs need to become MTFs, clients still need the ability to choose what kind of flow they want to interact with. Investors use BCNs because they want choice on order flow.”

Schmidt has proposed an amendment that states proprietary trading in OTFs should be permitted where “this is undertaken on a matched principal basis or with the consent of a client”. He defined matched principal as: “A transaction where the firm/operator sits in the middle of the trade and becomes the buyer to the seller and the seller to the buyer.” This would include trading done by brokers to facilitate client trades or retain client anonymity.

“This is a recognition that a strong enough case has not been made for an outright ban on proprietary capital and that two important principles were not reflected in the initial proposal,” said Rickard Ydrenäs, policy advisor to Schmidt. “The fact is that matched principal trading does not involve proprietary activity but is entirely derived from equal and opposite client flow, and ultimately investors must have the right to choose who they trade with preserved.”

Broker backing

Brokers appear encouraged by the latest developments and have reiterated that having a new category for BCNs that is too restrictive on the use of proprietary capital would be ineffective.

“A blanket prop trading ban in BCNs would be hard to implement, simply because it is so hard to define,” said Andrew Bowley, head of electronic trading product management at Nomura. “We think a more useful solution would be ensuring that broker-operated venues have adequate policies to control the potential conflicts of interest that could arise.”

Other market participants insist that such conflicts are already recognised and well managed.

“Concerns that principal trading in BCNs may cause an unmanageable conflict of interest are unfounded, brokers already have an overarching responsibility to manage a client’s order in the best interests of the client and to manage any potential conflict with that responsibility,” Andrew Morgan, head of Autobahn Equity Europe, the electronic trading division of Deutsche Bank. “If rules governing OTFs were to be publicly available with clients given the option of matching against principle business, then brokers breaching their own rules would face substantial commercial and regulatory risk"

According to figures from Thomson Reuters, broker crossing networks represented around 50% of the €52.7 billion of dark trading in Europe last month, with dark MTFs accounting for the remaining 50%. Overall dark trading represented 6.98% of total trading activity last month, down from March’s total of 7.24% but higher than the 5.24% recorded in April 2011.

Ferber will now take in amendments from the various MEPs and produce a compromise document that will be voted on by ECON in July. The Council of the European Union will then propose its version of MiFID II, before a final text is negotiated through the trialogue process, which involves the Parliament, Council and European Commission.

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Market participants will soon be able to access GETCO Execution Services Europe (GES Europe), the centrally-cleared broker crossing network run by electronic market making firm GETCO, via infrastructure and market data provider MarketPrizm.

MarketPrizm is to provide hosting and connectivity solutions for GES Europe using PrizmNet, its dedicated ultra-low latency connectivity infrastructure.Using the MarketPrizm link, brokers will be able to send their orders to GES Europe from anywhere in Europe by cross-connecting to PrizmNet.

GES Europe provides coverage of equities in the UK, France, Italy, Germany, Belgium, Portugal, Switzerland and the Nordic countries.

“MarketPrizm is connected to 23 markets in Europe and our robust and secure connectivity coupled with our market hosting solution will allow GETCO to reach more clients, in more markets, more quickly,” said Tanuja Randery, CEO, MarketPrizm. “Outsourcing non-core services such as connectivity and hosting makes good business sense as it reduces costs while providing the flexibility to allow infrastructure to be scaled up quickly and easily to suit changing business priorities.”

In addition to its European dark pool, GETCO also offers execution services in the US including GETAlpha, an execution algorithm for US equities that uses the same high-tech trading tools as a dedicated market maker; GETMatched, an electronic trading platform that provides access to GETCO liquidity; and GETRouted, a customised low-latency router.

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Speaking at the TradeTech Liquidity conference in London, Valérie Ledure, senior policy officer, Securities Markets, in the European Commission’s Directorate-General of Internal Market and Services, said banks could continue to conduct proprietary trading in Europe, but would not be allowed to execute prop flow in their own crossing networks that also contain client orders. Such broker-operated crossing networks will be categorised as organised trading facilities (OTFs) under the current draft of MiFID II.

“We are banning prop trading because we want venues to be neutral. This doesn’t mean banks cannot prop trade. Just not in their own entity where clients are trading,” said Ledure. “[Banks] can go to another venue to prop trade.”

Confusion has surrounded the Commission’s treatment of prop trading and a rule in the draft of MiFID II issued last month bans banks from engaging in the activity in some types of venues, specifically the newly created OTF.

The Commission admitted that its new OTF category was defined broadly on purpose, as an all-encompassing definition to capture existing platforms that are currently not regulated, as well as new types of platforms that will emerge in the future.

“The rationale is that if you carry out the same activities, then the same rules should apply. In practice we wanted to capture broker-crossing networks and inter-dealer platforms,” said Ledure.

Under its current wording, a broker-crossing network which crosses with its own proprietary flow will be considered a systematic internaliser (SI), while those which allow third-party access would be reclassified a multilateral trading facility (MTF).

“Banks are able to operate both an OTF and a systemic internaliser,” said Ledure. “They are also allowed to have an SI and an OTF in the same instruments, but they cannot trade that instrument on their own [crossing network].”

On provisions the Commission has inserted into MiFID II to curb perceived adverse effects of high-frequency trading (HFT), Ledure admitted Brussels had “come late to the debate”.

“We want to address market integrity issues and safeguard investors,” Ledure said. “We have tried to explain clearly what type of HFT is abuse and we want to know which algorithms are behind it.”

Under MiFID II, investment firms using algorithms or HFT strategies would be required to act as a quasi-market maker and provide liquidity on regular on-going basis. The requirement has been met with harsh criticism in the industry, which has branded it unworkable and tarring all electronic trading with the same brush.

“The liquidity provision has been highly controversial,” admitted Ledure. “We phrased it very broadly. Personally, I am open to improving this provision.”

Kay Swinburne, Conservative MEP for Wales, a member of the European Parliament’s Economic and Monetary Affairs Committee and a former investment banker, said prior to the Commission’s MiFID II draft, Parliament had already “debated long and hard” the market maker provision but had “stepped away” from the idea.

“I know some members of Parliament are already framing amendments to this section,” Swinburne said, imploring the industry actively participate in the legislative process.

To help with this dialogue, Parliament yesterday issued a questionnaire on MiFID II. The questionnaire, open to interested parties who wants to contribute to the debate, looks at all aspects of the Commission’s proposed changes to MiFID, including obligations of trading venues and restrictions on electronic trading. The deadline for responses is 13 January 2012.

Swinburne asserted that the industry should expect key provisions of MiFID II to be implemented sooner rather than later.

“If you think you have breathing space until 2014 to operate your venues as you currently do, think again,” warned Swinburne. “In the interests of market efficiency, the industry should demand solutions be put in place under current regulations. We don’t need to wait until MiFID II becomes law to implement some of its measures.”

After all three legs of European government – the Commission, Parliament, and Council –reach agreement on the text of MiFID II, the European Securities and Markets Authority (ESMA) will develop the technical details of the new rules. According to Swinburne, the next draft of MiFID II and MiFIR could be ready by February 2012, with March set aside to exchange views in Parliament. In July, the committee would vote in time for trialogue discussions in September. This would mean Brussels could reach “some agreement” by the end of 2012.

“ESMA would need one-to-two years to develop the details, so under the most optimistic timeframe, we would expect implementation by 2014,” Swinburne said. “But there is no excuse not to put many parts of MiFID II in place now. ESMA is already looking into how this could be accomplished, as are certain national regulators.”

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Pipeline has also announced the resignation of its chief executive Fred Federspiel, who has left the company to pursue other opportunities.

Biancamano previously served at rival block crossing venue Liquidnet as global head of marketplace and corporate strategy and as a vice president and director at agency broker ITG, which also runs the POSIT dark pool.

“I’m excited to accept this opportunity to lead Pipeline forward,” said Biancamano. “This company has great products, very talented and dedicated people, and tremendous upside as a leading technology innovator.”

“Under Jay’s leadership, we will offer our customers innovative products that provide excellent execution, and work hard to earn their renewed trust,” added Reid Curley, chief operating officer of Pipeline Financial Group

Federspiel and Berkeley were both the subject of a recent investigation by US regulator the Securities and Exchange Commission (SEC).

The SEC found that Pipeline failed to disclose to clients that the vast majority of orders executed in its dark pool were filled by Milstream Strategy Group, an entity trading entirely owned and funded by Pipeline and managed by Federspiel between 2004 and 2006.

Pipeline was fined US$1 million, while CEO Fred Federspiel and chairman Alfred R. Berkeley III were fined US$100,000. In settling the matter, Pipeline, Federspiel and Berkeley did not admit to or deny the SEC’s findings.

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Institutional investors are bolstering their due diligence on dark pools in response to a recent sanction of a block-crossing venue in the United States.

US-based heads of trading at a number of buy-side firms said they were seeking further details on how their orders are being executed on dark pools and crossing networks after Pipeline Trading Systems and two of its senior executives were fined last week by the Securities and Exchange Commission (SEC) for failing to disclose that a high proportion of orders executed on behalf of buy-side customers in its US dark pool were filled by an affiliated trading firm.

“As a result of the news that Pipeline was sanctioned by the SEC, I conducted extra due diligence with all of our dark pool providers,” said Mark Kuzminskas, director of equity trading at buy-side firm Robeco Investment Management, echoing the views of several buy-siders spoken to by TheTRADEnews.com. “It was important to discuss the present situation and enquire whether we executed against a prop desk or an affiliate of theirs.”

As part of his due diligence, Kuzminskas asked many brokers whether they routed order flow to Pipeline. “More often than not the answer was that they had little or no interaction,” he said.

Clive Williams, global head of equity trading at T Rowe Price, said in the past couple of weeks he had also re-ignited due diligence efforts, contacting dark pools and venues to examine their routing systems and relationships with affiliates and HFTs.

“It is extremely important to keep abreast of how the venues you use operate,” he said. “When the possibilities of how to execute a trade are endless, there are so many potential conflicts in the markets that you need to be aware of.”

Pipeline was fined US$1 million, while chief executive Fred Federspiel and chairman Alfred R. Berkeley III were each fined US$100,000. In settling the matter, Pipeline, Federspiel and Berkeley did not admit to or deny the SEC’s findings.

“In recent years, with increases in high frequency trading and the maker-taker fee structure, buy-side firms have been more aware of routing practices,” said Kuzminskas.

Other US trading venue operators said they had seen a mild uptick of due diligence enquiries from the buy-side in recent weeks but declined to comment on the record.

However, Morgan Stanley advocated greater transparency and information-sharing between dark pools and the buy-side.

“Morgan Stanley has always been vocal about the importance of transparency and the firm has had a consistent policy on order routing since the inception of its dark pool in 2006,” said Andrew Silverman, co-head of Morgan Stanley Electronic Trading.

In 2008, Morgan Stanley launched an information campaign called ‘Shades of Grey’ in a bid to educate buy-siders about what happens with their flow once it enters a dark pool. At the time, Silverman said dark did not always mean “completely dark”, observing that most dark liquidity pools should more accurately be described in various shades of grey, depending on how much information exchange they allow.

“Traders should understand the differences between these shades of grey because they offer a trade-off between liquidity and information leakage that may impact the stock. We have always believed not all liquidity is good liquidity, if you are leaving a footprint in every pool you touch,” said Silverman. “Clients are now much more aware of what happens in dark pools. They now have a more heightened sensitivity.”

The SEC said claims by Pipeline that its alternative trading system (ATS) provided institutional clients with “natural” trading opportunities and prevented “pre-trade information leakage” were “false and misleading”, given the presence of a trading affiliate on the other side of most trades.

Pipeline insisted clients had not been disadvantaged by the use of Milstream and the firm intended to offer clients the option of trading with the affiliate via an initiative called Pipeline Liquidity Pro.

Concern about the increase of trading in dark pools led the SEC to propose a three-point plan on 29 October 2009: lowering the threshold at which alternative trading platforms must display bids and offers to 0.25% of a stock’s average daily volume from 5%; introducing real-time disclosure of executions by all venues; and bringing reporting in line with registered exchanges.

The SEC supplemented these proposals in its equities market concept release on 13 January 2010, which floated the idea of a ‘trade-at’ rule which would prevent non-displayed venues from matching at the national best bid and offer (NBBO), and instead proposed that they should either match at a significantly improved price e.g. by the minimum tick size, or should route orders to a displayed venue that could complete the trade at the NBBO. The rule would prevent trades from being crossed in dark pools when that offered no advantage over crossing in a lit venue, but limited price formation.

However these proposals have been frozen, as regulators focus on implementing the many rules that were put in place by the Dodd-Frank Act, which came into law in July 2010.

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Former Securities and Exchange Commission (SEC) commissioners Lady Barbara Thomas Judge and Roel Campos join Lawrence S. Bacow as Liquidnet’s latest non-executive board members.

Seth Merrin, founder, chief executive and chairman of the board of directors of Liquidnet, said the new appointments would bring significant global regulatory and economic expertise to the firm.

“Our new board members bring extensive international experience in the public and private sectors as well as intimate knowledge of the global regulatory environments,” said Merrin. “They also bring a shared commitment to our mission of providing institutional investors with superior liquidity and best execution.”

Lady Judge was appointed in 1980 as the youngest ever commissioner of the SEC. She is currently chairman of the Pension Protection Fund, a statutory corporation created by the UK’s Pensions Act of 2004 to insure defined benefit pension plans in the UK.

Campos was an SEC commissioner from 2002 to 2007, where he was vice chair of the technical committee of the international organisation of securities commissions. He is currently a partner with Locke Lord LLP, leading the firm’s securities regulation and enforcement practice. Campos was recently named to President Obama’s Presidential Intelligence Advisory Board.

Bacow was president of Tufts University from September 2001 to August 201l and is also a former chancellor of the Massachusetts Institute of Technology. He has served in a range of government advisory positions and has held visiting professorships at leading universities in Europe, the Middle East and Latin America. Earlier this year he was named a member of the Harvard Corporation, the nine member governing body of Harvard University.

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Pipeline has been fined US$1 million, while CEO Fred Federspiel and chairman Alfred R. Berkeley III have been fined US$100,000. In settling the matter, Pipeline, Federspiel and Berkeley did not admit to or deny the SEC’s findings.

According to the SEC, Pipeline failed to disclose to customers that the “vast majority of customer orders” on its system were filled by Milstream Strategy Group, an entity trading entirely owned and funded by the dark pool operator and managed by Federspiel between 2004 and 2006.

The regulator added that claims by Pipeline that its alternative trading system (ATS) provided institutional clients with “natural” trading opportunities and prevented “pre-trade information leakage” were “false and misleading” given the presence of a trading affiliate on the other side of most trades. Pipeline insists that clients have not been disadvantaged by the use of Milstream and the firm now intends to offer clients the option of trading with the affiliate via an initiative called Pipeline Liquidity Pro.

The SEC said breaches of the US Securities Act and Regulation ATS took place between August 2004 and March 2010 relating to trades conducted on Pipeline’s Block Board, a desktop trading tool that notifies traders when there is trading interest in a particular stock. The SEC states that Milstream Strategy Group was created by Pipeline several months before its US launch in September 2004 (then known as Exchange Advantage) to help build liquidity on its platform.

Milstream traded in front of the orders placed by institutional investors in Pipeline by sourcing the required liquidity from other trading venues and then selling or buying the shares to the Pipeline member. Although the Block Board does not indicate the size, direction or price of an order, Milstream traders used market conditions, recent trading history, and test orders in Pipeline and other dark pools to determine the liquidity it needed to fill an order. This means Pipeline occasionally provided Milstream with information about client trades.

In the first four months after launch, the entity that later became Milstream was the counterparty to 97.5% of transactions executed on Pipeline, dropping to 87% in 2005. From launch to 31 December 2009, Milstream is understood to have participated in 80% of Pipeline’s trading volume.

The SEC said that use of Milstream was inconsistent with Pipeline’s claims to customers that its flow emanated from “natural” counterparties. Moreover, the regulator points out that in press releases and interviews, Pipeline executives regularly positioned the service as protecting institutional clients against proprietary trading flow that sought to exploit buy-side orders. Milstream traders were apparently paid using a formula that rewarded them in part for giving favourable prices to Pipeline’s customers.

Pipeline also failed to disclose to the SEC – as is required under Regulation ATS – that Milstream was involved in the operation of its dark pool, and sent out misleading marketing information. By giving Milstream access to the orders in its system, Pipeline was also charged with failing to safeguard customers’ confidential trading information, although the SEC order acknowledges that the firm was not seeking to take advantage of customers.

“However orders are placed and executed, be it on an exchange floor or in an automated venue, whether dark or displayed, one principle remains fundamental – investors are entitled to accurate information as to how their trades are executed. Pipeline and its senior executives are being held to account because they misled their customers about how Pipeline’s dark pool really worked,” said Robert Khuzami, director of the SEC’s Enforcement Division.

In a prepared statement, Pipeline said it would provide greater clarity to customers in future. “We are pleased that the agreement we have entered into with the SEC resolves allegations that Pipeline made certain untrue or misleading statements regarding its block trading system and the role of its trading affiliate, and failed to properly disclose to clients or the SEC the role played by this affiliate in the operation of the Block Market. The agreement will enable us to continue to provide our customers with the excellent trade execution quality and access to sources of liquidity which they have come to trust over the years,” the statement read.

According to a monthly dark pool liquidity tracking service from US brokerage Rosenblatt Securities, Pipeline traded approximately 3.1 million shares – or 0.04% of total consolidated liquidity – in September 2011, 38% lower than August’s total of five million shares.

While Pipeline expects to continue to provide off-exchange crossing services to institutional investors, a number of observers have suggested that the damage to its reputation caused by the SEC ruling will be hard to overcome.

“It’s difficult to see how Pipeline can maintain its credibility with institutional investors after this. The firm held itself out as a guardian of buy-side orders against short-term gamers. But if the SEC allegations are true, Pipeline’s business model was highly dependent on information leakage,” said Justin Schack, managing director, market structure analysis at Rosenblatt.

In Europe, Pipeline Financial Group operates the multilateral trading MTF known as the Pipeline European Block Board.

In a statement, the company said the European operation does not and never has allowed any affiliate company to trade on its own account with, or provide liquidity to the European Block Board.

“Neither Pipeline nor any affiliate undertakes any form of proprietary trading, market making, capital commitment or establishment of directional positions on behalf of clients in relation to the European Block Board,” the company.

Pipeline operates the European Block Board on a common access policy and common rules whereby all users receive exactly the same level of system information in all respects according to the system rules when undertaking trades on the European Block Board.

The European Block Board was launched in May this year and in September saw record growth in terms of client order flow.

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The filing relates to Liquidnet’s appointments of Lou Kerner and Michael Silverstein, announced on 17 October, and the subsequent establishment of Liquidnet’s Private Shares Group, a new global initiative designed to facilitate trading in the shares of privately-owned companies such as Facebook and Twitter.

Kerner’s role at Liquidnet involves liaising with institutional investors seeking access to high-growth opportunities, as well as working directly with privately-owned, pre-IPO companies that want to set up transfers of equity stakes.

A court filing lodged at the New York Supreme Court alleges that Liquidnet, Kerner, who was formerly vice president of equity research covering social media and e-commerce at Wedbush, and Silverstein, engaged in “pre-meditated taking and misappropriation of certain of Wedbush’s most valuable trade secret and confidential and proprietary information including its detailed customer lists…with the goal of “starting” the same business they took from Wedbush at Liquidnet”.

Wedbush has operated its own Private Shares Group, as a division of its equity business, since March 2011.

Kerner is said to have informed Wedbush of his departure on 16 October. Liquidnet, Kerner and Silverstein are accused by Wedbush of having begun “blatantly soliciting Wedbush’s customers and potential customers” using the firm’s customer data the following day.

Wedbush is seeking to prevent Liquidnet from continuing to use its customer data and to obtain compensation.

Liquidnet has 20 days to reply to a court summons issued on 20 October. A spokesperson for Liquidnet acknowledged the lawsuit and said the firm was reviewing the allegations closely.

Earlier this year, a compromise agreement was reached by Liquidnet and ITG, a US-listed agency broker and technology provider, following a five-year legal dispute over the use of ‘blotter scraping’ technology deployed in the firms’ crossing networks.

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