Hong Kong Exchanges and Clearing (HKEx) is looking at adding certain features of 'dark pools' to its traditional trading platform during the long term and remains open to working with alternative trading system (ATS) operators to provide anonymous block trading for stocks listed on the Hong Kong bourse.

The exchange's position was clarified by Gerald Greiner, chief operating officer of the HKEx - the operator of the stock exchange - at the company's annual results meeting in Hong Kong last week. But a move to set up a dark pool in a similar manner to rival the Singapore Exchange (SGX) may still be some years away, if it happens at all.

Greiner told Asia Risk that trading volume amassed by the ten dark pools that are exchange participants, accounted for around 1% of the market volume - the main board in Hong Kong handled HK$15.44 trillion ($1.99 trillion) worth of shares last year. Greiner said the exchange would have to decide whether or not there was sufficient demand for the HKEx to also operate a dark pool in the future.

The Singapore Exchange (SGX) plans to launch Asia's first exchange-backed dark pool in a joint venture with Chi-X Global, an affiliate of Chi-X Europe, the biggest paEuropean equities multilateral trade facility, in the second or third quarter. However, Greiner says the creation of a joint venture model to offer dark pool facilities is among one of the many possibilities that the HKEx is considering.

"Longer term we would need to consider whether we will have a dark pool," says Greiner. "So in the future we would have to decide, 'do we have an 'iceberg' or dark component to our system?' 'Do we put it into our system; [or] can we add something on, like Chi-X and Singapore [Exchange] is doing perhaps?'" Iceberg describes a process where the public display is only a small portion of what actually is a large order by an institutional investor, using an automated programme to hide the actual order quantity of the order to reduce market impact.

Greiner's comments fall well short of providing any firm plans, but appear to represent a more accepting attitude towards dark pools compared with comments made by HKEx chairman, Ronald Arculli, in December last year. Arculli said dark pools risked jeopardising fair price discovery for investors and the level-playing field afforded by trading on exchanges. Dark pools effectively create a two-tiered market as some investors have more information about trades that others using publicly available quotes. "The opaqueness of trading and its fragmentation have negative implications for effective corporate governance," Arculli told a public forum at the end of last year.

Some industry participants linked the more open stance from Greiner to the new leadership of HKEx under Charles Li, who assumed the role of chief executive in January, replacing predecessor Paul Chow.

Greiner said if the Chi-X and SGX model was successful, HKEx might engage in a similar process in Hong Kong to make HKEx more competitive. The other option was for the exchange to assume the role of a neutral aggregator of liquidity for traders using the 10 ATS that are currently exchange participants but are not inter-connected. That way, traders can access these ten liquidity pools freely.