Fast-paced world of trading, especially for large institutional investors, executing large trades can often be a difficult and complex process. Traditional methods of executing these trades may not always offer the best prices or the most efficient pathways, often requiring significant human intervention and multiple parties. Recognizing the challenges posed by large, complex trades, Liquidnet, a leading agency execution specialist, has made strides in developing innovative solutions to enhance trade execution for institutional clients.
One such innovation is Liquidnet’s SuperBlock Matching, which has gained significant attention since its introduction in 2024. This system, designed to address the most difficult trades — typically those involving large positions by value or large numbers of shares — has evolved rapidly from its initial launch and is now undergoing further development to meet the changing needs of traders globally.
The Genesis of SuperBlock Matching
SuperBlock Matching was first introduced by Liquidnet in April 2024 in Europe, the Middle East, and Africa (EMEA) regions, with the goal of improving the execution process for large trades that traditional methods struggled to handle efficiently. This was followed by a global rollout in July 2024. Its purpose was clear: to help institutional traders execute large orders in a way that was both more efficient and cost-effective, overcoming some of the traditional obstacles associated with big trades.
In essence, SuperBlock Matching enables traders to disclose more information about their trades, such as the certainty of trade size, without necessarily revealing too much. This allows buyers and sellers to trade large positions with greater transparency and confidence. According to Rob Cranston, the Global Head of Equities Product at Liquidnet, this level of innovation is aimed at reducing the friction that traditionally accompanies the execution of large trades.
How SuperBlock Matching Works
At its core, the SuperBlock Matching system works by setting a minimum size for each stock based on its market capitalization. For example, the trade must meet specific size criteria for SuperBlock Matching to be available. Once these criteria are met, the functionality is automatically triggered in a trader’s front-end system.
The system then facilitates a matching process in which both parties, the buyer and the seller, agree to release more details about the transaction, including a higher level of certainty about the size of the trade. This exchange of information is crucial because it establishes trust and clarity between the two parties, which can often be a barrier in trading large quantities of stock.
Once both parties reach an agreement, they commit to executing the trade, and Liquidnet steps in to police this commitment. This ensures that if a trade is agreed upon, it is executed, with penalties in place for either party if the trade does not come to fruition. This commitment to ensuring trades are completed is an essential part of the SuperBlock Matching model, as it significantly reduces the uncertainty associated with executing large trades in the traditional market.
Global Response and Adoption of SuperBlock Matching
Since its global launch in 2024, the response to SuperBlock Matching has been overwhelmingly positive. Cranston shared that more than $1 billion worth of trades had already been executed through the platform. This figure is indicative of the system’s success in delivering value to institutional traders and in facilitating the execution of larger and more complex deals.
This success is also reflected in the feedback from Liquidnet’s clients. Institutional investors are increasingly turning to electronic trading solutions as a way to better manage their portfolios, streamline trade execution, and reduce costs. SuperBlock Matching’s positive reception underscores a growing recognition of the advantages that technology and innovation can bring to large-scale trading.
Liquidnet’s Ongoing Innovation: The Road Ahead for SuperBlock Matching
Looking forward, Liquidnet is committed to continuing the development of SuperBlock Matching and exploring ways to integrate it into other workflows. Cranston explained that Liquidnet is reviewing the next phase of innovation for the SuperBlock system, including expanding its applicability to other asset classes and trading workflows. The company is determined to offer a seamless, end-to-end solution that provides institutional investors with more options for trade execution, all within a single platform.
“We are reviewing the next innovation and whether SuperBlock-sized executions could be applicable to other workflows,” Cranston remarked. He also highlighted that Liquidnet’s ultimate goal is to offer algorithmic tools for buy-side traders that provide a comprehensive, end-to-end workflow — from the initial order initiation to trade completion. This would allow institutional investors to access a full range of execution strategies, further enhancing their ability to manage large trades effectively.
The Role of Artificial Intelligence in Liquidnet’s Future
In addition to refining the SuperBlock Matching system, Liquidnet is placing a strong emphasis on the integration of artificial intelligence (AI) into its platform. AI is seen as a pivotal tool in adapting to the changes occurring in the trading landscape, and Liquidnet believes that it is well-positioned to leverage this technology to improve operational efficiency and enhance trade execution.
AI can offer several benefits in the context of trading, including the ability to analyze vast amounts of market data, identify patterns, and predict optimal trade execution strategies. For institutional traders, AI has the potential to automate decision-making processes, enabling more efficient and effective trading. Cranston noted that Liquidnet is actively exploring how AI can be utilized to provide even greater value to clients in the future.
The Emergence of Multi-Asset Trading Solutions
Liquidnet’s focus on innovation does not stop with the development of SuperBlock Matching and AI. The company has also embraced the growing trend of multi-asset trading, which reflects the changing demands of institutional clients. With more buy-side clients establishing desks that handle a diverse range of asset classes, Liquidnet recognized the need to provide a platform that could serve as a single point of contact for trading across multiple asset types.
To meet this need, Liquidnet launched a multi-asset service in 2024, further expanding its product offering. The service includes the establishment of a multi-asset desk in Europe, which enables traders to access a variety of asset classes, from equities to fixed income and beyond. This new service provides Liquidnet clients with greater flexibility and the ability to execute trades across a wide range of financial products.
Cranston referred to the multi-asset service as “another string to our bow,” recognizing that institutional investors are increasingly seeking solutions that can help them trade across various asset classes. As the financial landscape continues to evolve, Liquidnet’s commitment to offering integrated solutions reflects its adaptability and understanding of client needs.
The Changing Landscape of U.S. Equity Trading
The U.S. equity market has been undergoing significant changes, and Liquidnet’s strategies are aligned with these evolving trends. According to annual research from Crisil Coalition Greenwich, sourcing natural liquidity continues to be a top priority for institutional equity investors. Even though electronic trading has become increasingly popular, high-touch sales traders are still highly valued for their ability to locate hard-to-find liquidity and manage complex orders.
In 2024, U.S. equity markets saw a continued shift toward electronic trading, with 44% of overall trading volume being executed electronically, including through algorithmic strategies and crossing networks. Looking ahead, managers expect electronic trading to account for nearly half of their flow within three years, signaling a decline in high-touch trading, which is forecasted to make up only 39% of their flow by then.
These shifts in trading behavior highlight the growing importance of electronic and algorithmic solutions, which Liquidnet has prioritized with the launch of SuperBlock Matching and other technology-driven tools. The company is clearly well-positioned to meet the evolving needs of institutional investors in the years to come.
Frequently Asked Questions
What is SuperBlock Matching?
SuperBlock Matching is a system designed to help institutional traders execute large trades efficiently by disclosing more trade details without revealing too much.
How does SuperBlock Matching work?
It sets minimum trade sizes based on market cap. If criteria are met, it allows both parties to agree on more trade details, with Liquidnet ensuring trade execution and enforcing penalties for non-completion.
Where was SuperBlock Matching launched initially?
It was first launched in EMEA in April 2024 and rolled out globally in July 2024.
What are the benefits of using SuperBlock Matching?
It provides efficient execution, reduces friction, increases transparency, and enforces trade commitments.
How much volume has been traded using SuperBlock Matching?
Over $1 billion in trades have been executed since the global launch.
What is Liquidnet’s role in trade execution?
Liquidnet specializes in agency execution, providing efficient and low-friction platforms for large institutional trades.
How does Liquidnet integrate Artificial Intelligence (AI)?
Liquidnet is exploring AI to improve trade execution, automate decision-making, and analyze market data.
What other innovations is Liquidnet working on?
Liquidnet has launched a multi-asset service, offering a platform for trading various asset classes like equities and fixed income.
What are Liquidnet’s future plans for SuperBlock Matching?
Liquidnet is exploring expanding SuperBlock Matching to other asset classes and workflows.
Conclusion
Liquidnet’s commitment to innovation in trade execution is evident in the development of SuperBlock Matching and its ongoing efforts to integrate new technologies like AI and multi-asset solutions. As the world of institutional trading continues to evolve, Liquidnet’s ability to adapt to these changes — while providing cutting-edge solutions for large-scale, complex trades — ensures that the company remains a leader in the space.
