Liquidnet collaborates with IEX for new trading algorithm (FierceFinanceIT July 2015)

Liquidnet collaborates with IEX for new trading algorithm

By Renee Caruthers Comment | Forward | Twitter | Facebook | LinkedIn


Liquidnet has announced a new algorithm that will give its clients the access to additional liquidity on the IEX marketplace while continuing to maintain safety and security for clients’ block orders.Liquidnet, a global leader in large block trading, is known as a dark pool where asset managers can move large block trades, averaging 42,000 shares per trade, without impacting the market. IEX, backed by a consortium of buy-side firms, gained fame through the Michael Lewis best-seller “Flash Boys” because it was designed with a “speed bump” to prevent high-frequency traders from using time advantages to manipulate the market.

After an order sits on Liquidnet’s platform for five seconds, the new algorithm will route the unexecuted portion to IEX, Bloomberg reported. IEX and Liquidnet handled a combined 1.3 percent of trading volume in the U.S. last month according to data compiled by Bloomberg. IEX accounted for four-fifths of that volume and Liquidnet for one-fifth. Liquidnet said the compatibility of the two venues trading objectives made IEX a good fit to tap for additional liquidity through the new algorithm.

“We are always looking to provide our members with better access and more control over their block orders. Traders can now work their orders safely and securely within both Liquidnet and IEX,” Scott Kartinen, head of algo products at Liquidnet said. “This is one more way that we are providing the market with save and efficient ways to trade.”

IEX chief strategy officer Ronan Ryan also noted the similar focus on buy-side protections of the two venues.

“For the buy side looking to execute blocks, Liquidnet sets the standard in “upstairs trading” while we at IEX are proud of attracting large orders in the continuous market through our protective technology,” he said. “This new routing strategy delivers the best of both worlds to the buy side. Through this collaboration, safe access to two significant pools of liquidity are brought together for the buy side.”

Liquidnet clients can access the algorithm from their desktop application or through Liquidnet’s Trading Desk.

In September, global agency brokerage ConvergEx also partnered with IEX to introduce a new trading algorithm that routes a portion of trades to the IEX market. ConvergEx’s Darkest + IEX trading algorithm allows institutional investor clients to split their orders, routing 25 percent or 50 percent of their trade to the IEX marketplace and sending the balance to ConvergEx’s Darkest algorithm, which searches for liquidity among 20 other non-displayed venues.

ConvergEx said it worked with IEX to launch the algorithm after tests showed it was successful without introducing latency arbitrage issues.

For more:
– read the Bloomberg article
– read the Traders magazine article
– read the Automated Traders article

Related Articles:
ConvergEx teams with IEX for new order routing strategy
IEX raises financing, prepares to start exchange push

Read more about: IEX, Ronan Ryan
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