Seth Merrin
Chief Executive Officer
Liquidnet Holdings

“Our goal is to make markets more efficient,” Seth Merrin says. “The only way we know how to do this is with technology.” Merrin is proving the point with 15-year-old trading platform operator Liquidnet Holdings, and not for the first time. Three decades ago he left a risk arbitrage trading job at CIBC Oppenheimer to start Merrin Financial, which transformed buy-side trading with its invention of the order management system. After co-founding another start-up, application-integration software company VIE Systems, in the 1990s, Merrin launched Liquidnet, a pioneering dark pool handling large block orders — currently averaging more than 42,000 shares ($1.8 million principal) — that are difficult for investment managers to execute on open exchanges. More than 800 member firms with $14 trillion in combined assets under management are currently trading in 44 markets around the world. New York–based Liquidnet’s first-quarter U.S. average daily volume of 46 million shares was up 21 percent year-over-year, and the firm also set records in other regions. Last September, with Liquidnet Fixed Income, the firm brought its ethos of reinvention into the corporate bond market, setting a minimum order size of $500,000. “It’s pretty absurd if in this day and age you can only trade a bond through a human being,” Merrin says. The platform now has 135 member firms trading $2 billion in corporate names, and the 56-year-old CEO anticipates steady growth because “people in this industry need to see you’re the winner” before later adopters will sign on. Merrin expects further opportunity in equity execution and quantitative services, filling gaps left by the retreat of big, capital-constrained banks. Liquidnet has developed an electronic “high-touch trader” to provide copilotlike order advice and monitoring. Targeted Invitations, launched in Europe late last year and available globally as of April, extends the block-trading model by “taking on one of the last bastions of inefficiency for the buy side: the sales trading process,” according to Merrin. These targeted block trades have been averaging 98,000 shares.

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