Squawker® Completes Launch of Equity Finance Platform with 6 of the World’s largest 10 Global Investment Banks Live

Ian Axe and Derek Bandeen Join Squawker’s Advisory Board

London (UK) – 19 April 2017 – Squawker®, the platform for sophisticated trading communities to execute hedging and capital optimisation transactions on-exchange, today announced the successful completion of the launch phase of its Equity Finance platform, with 6 out of the top 10 global investment banks live, and announced Ian Axe and Derek Bandeen as two new members to its Advisory Board.

Chris Gregory, CEO and co-founder, Squawker, comments: “The European Equity Finance market is currently estimated to trade over €2.5 trillion per annum. With six of the top ten banks live and trading through Squawker, we are already seeing some significant trading traffic over the platform. With a further three of the top ten banks close to completing their deployment projects, Squawker has worked hard to provide the essential support that the Equity Finance community has asked us for.”

The announcement marks a significant shift for Squawker, the facilitator of hedging and capital optimisation transactions. Designed and developed in partnership with the world’s leading investment banks, Squawker’s new platform provides a central hub for the European Equity Finance community to bring the execution of equity hedge trades on-exchange. The solution provides Equity Finance traders with settlement against the three largest equity CCPs and facilitating compliance with their trade reporting, MiFID II and MiFIR regulatory requirements. In addition, Squawker’s solution overcomes several key operational issues that currently restrict and limit trading in certain markets, such as automatic registration of share ownership in Spain.

Ian Axe, the recently-designated CEO of Panmure Gordon, former chief executive of LCH.Clearnet, and previously global head of operations and COO for EMEA at Barclays Capital, and Derek Bandeen, former Global Head of Equities at Citigroup join Squawker’s advisory board.

Ian Axe comments: “The top-tier investment banks are under increasing regulatory pressure for on-exchange transparency and central clearing counterparty (CCP) cleared models across their operations. They are all seeking to implement Straight-Through Processing for Equity Finance to replace the traditional OTC process.

Derek Bandeen adds: “Squawker’s platform enables the large Equity Finance players to bring their execution of equity hedge trades on-exchange and provides a structure for them to manage their counterparty risk with Central Counterparty clearing.”

Squawker® High-Touch Negotiation Platform Adds Program Trading and Fidessa Modules for Improved STP

Squawker Now Accessible from Fidessa Spotlight – Streamlining Squawker with Dark Pool Workflows Without Compromising its Human, Algo-Free Nature

London (UK) – 15 July 2014 – Squawker®, the power behind the world’s only toxic-free, negotiated trading platforums and facilitator of compliant, algo-free trading communities, today launched its Program Trading and Fidessa modules for its Cash Equities trading community of more than 95 sell-side firms, and announced further improvements to the platform’s performance and stability. The new trading modules have been developed to meet the specific requests of Program Traders and Fidessa users respectively, streamlining negotiated trading with the trader’s algorithmic workflow and bringing OTC negotiated workflow into the trader’s automated algorithmic workflow, via Fidessa Spotlight.

Chris Gregory, CEO and co-founder, Squawker, comments: “Squawker’s Program Trading module enables traders to simply copy and paste programs direct into Squawker making it easy to input lists of orders. Squawker has the artificial intelligence to match the details of each instruction into its workflow, so that traders can Squawk orders which are difficult to execute over the order books or dark pools.

Users can also edit the visibility of their baskets, dark or lit, within Squawker by a simple right-click.”

Fidessa users now have direct connectivity with Squawker via their Spotlight workflow. Gregory continues: “Spotlight is the algorithmic automation system in Fidessa. It automates the sending of orders to multiple venues. The main ways of doing it in Spotlight are Ping and Spray. Spray is where an order is automatically cut up into smaller pieces and those smaller pieces are sent out to multiple venues in parallel. A Ping order, however, is sent to a single destination where it executes as much as is available, before moving onto the next venue and so on.”

Fidessa has enabled its customers to include Squawker in those destinations that receive FIX orders from Spotlight. Gregory adds: “On our side, we’ve enhanced Squawker’s intelligent memory functionality so that Spotlight orders are remembered within Squawker to dovetail Squawker’s workflow with that of Spotlight’s. For example, a trader’s Ping order to a dark pool stipulates that if a match is found, it should execute automatically, or the order should be cancelled. Within Squawker, nothing automatically executes. So when Squawker receives a Ping order, it remembers what you’re interested in trading, goes on to look for the other side for you and then links Squawker’s workflow to Spotlight’s workflow to eliminate the risk of over-trading when executing a block on Squawker.”

In addition, Fidessa’s connectivity with Squawker allows firms that send out natural Indications of Interest (IOIs) to the market to include Squawker in their recipient list. Squawker always maintains its human, algo-free nature, but Fidessa’s addition of Squawker to its destination list enables those IOIs to become actionable at the trader’s discretion. This streamlined integration makes it easier than ever before for traders to execute blocks off the back of their IOIs.

Further enhancements to Squawker’s platform include:

  • Enhanced Pop-up Alerts:
    As users increasingly use ‘Dark’ interests to hide their side and price, the Pop-Up Alerts have been enhanced to fully support Dark interests;
  • Counter-proposals in Negotiations: Users can now decline and counter propose price and quantity in a single step;
  • Easier Change Price in Negotiations;
  • More Prominent and More Configurable Fat Finger Checks.

Fidessa Connects Sell-Side OMS to Squawker® Block Trading Negotiation Venue

Fidessa Network of Sell-side Firms Equipped to Route Orders, IOIs and Advertised Trades Direct from their Trade Blotter to Squawker at Go-live

London (UK) – 17 December 2012 – Squawker®, the negotiation venue for sell-side block trading, today announced that Fidessa group plc (LSE: FDSA), provider of high-performance trading, investment management and information solutions for the world’s financial community, has completed the pan-European FIX integration from Fidessa’s OMS to Squawker. The deep systems integration will ensure that users of the Fidessa European Trading Platform (ETP) will be able to route Orders, IOIs and Advertised Trades to Squawker direct from their OMS, when the new block trading venue goes-live in the first quarter of 2013.

Chris Gregory, CEO, Squawker, comments: “Squawker matches trading counterparts, enabling them to build block volumes together, according to their different types of interests. Those interests can be expressed by users from their OMS using orders, IOIs and Advertised Trades. From day-one when Squawker goes-live, Fidessa’s ETP users will be able to access the liquidity on Squawker, in the same way that they can access all of the world’s other major trading venues.”

Gregory continues: “The challenge of finding block interest needs to be resolved and we are seeing significant appetite to Squawker playing a key role in solving this challenge. Fidessa has now completed the Fidessa ETP FIX connectivity and deep integration with Squawker which will enable its clients to have easy access to this new source of liquidity. The deep integration will allow ETP users to automate this process even further by easily configuring their Fidessa OMS to automatically route IOIs to Squawker the instant they receive a block order onto their OMS blotter.”

Squawker is in discussions with the full range of sell-side firms, including investment banks, market makers, agency brokers, proprietary and principal trading firms.

Fidessa Network of Sell-side Firms Equipped to Route Orders, IOIs and Advertised Trades Direct from their Trade Blotter to Squawker at Go-live

London (UK) – 17 December 2012 – Squawker®, the negotiation venue for sell-side block trading, today announced that Fidessa group plc (LSE: FDSA), provider of high-performance trading, investment management and information solutions for the world’s financial community, has completed the pan-European FIX integration from Fidessa’s OMS to Squawker. The deep systems integration will ensure that users of the Fidessa European Trading Platform (ETP) will be able to route Orders, IOIs and Advertised Trades to Squawker direct from their OMS, when the new block trading venue goes-live in the first quarter of 2013.

Chris Gregory, CEO, Squawker, comments: “Squawker matches trading counterparts, enabling them to build block volumes together, according to their different types of interests. Those interests can be expressed by users from their OMS using orders, IOIs and Advertised Trades. From day-one when Squawker goes-live, Fidessa’s ETP users will be able to access the liquidity on Squawker, in the same way that they can access all of the world’s other major trading venues.”

Gregory continues: “The challenge of finding block interest needs to be resolved and we are seeing significant appetite to Squawker playing a key role in solving this challenge. Fidessa has now completed the Fidessa ETP FIX connectivity and deep integration with Squawker which will enable its clients to have easy access to this new source of liquidity. The deep integration will allow ETP users to automate this process even further by easily configuring their Fidessa OMS to automatically route IOIs to Squawker the instant they receive a block order onto their OMS blotter.”

Squawker is in discussions with the full range of sell-side firms, including investment banks, market makers, agency brokers, proprietary and principal trading firms.

Fidessa Network of Sell-side Firms Equipped to Route Orders, IOIs and Advertised Trades Direct from their Trade Blotter to Squawker at Go-live

London (UK) – 17 December 2012 – Squawker®, the negotiation venue for sell-side block trading, today announced that Fidessa group plc (LSE: FDSA), provider of high-performance trading, investment management and information solutions for the world’s financial community, has completed the pan-European FIX integration from Fidessa’s OMS to Squawker. The deep systems integration will ensure that users of the Fidessa European Trading Platform (ETP) will be able to route Orders, IOIs and Advertised Trades to Squawker direct from their OMS, when the new block trading venue goes-live in the first quarter of 2013.

Chris Gregory, CEO, Squawker, comments: “Squawker matches trading counterparts, enabling them to build block volumes together, according to their different types of interests. Those interests can be expressed by users from their OMS using orders, IOIs and Advertised Trades. From day-one when Squawker goes-live, Fidessa’s ETP users will be able to access the liquidity on Squawker, in the same way that they can access all of the world’s other major trading venues.”

Gregory continues: “The challenge of finding block interest needs to be resolved and we are seeing significant appetite to Squawker playing a key role in solving this challenge. Fidessa has now completed the Fidessa ETP FIX connectivity and deep integration with Squawker which will enable its clients to have easy access to this new source of liquidity. The deep integration will allow ETP users to automate this process even further by easily configuring their Fidessa OMS to automatically route IOIs to Squawker the instant they receive a block order onto their OMS blotter.”

Squawker is in discussions with the full range of sell-side firms, including investment banks, market makers, agency brokers, proprietary and principal trading firms.

Fidessa Network of Sell-side Firms Equipped to Route Orders, IOIs and Advertised Trades Direct from their Trade Blotter to Squawker at Go-live

London (UK) – 17 December 2012 – Squawker®, the negotiation venue for sell-side block trading, today announced that Fidessa group plc (LSE: FDSA), provider of high-performance trading, investment management and information solutions for the world’s financial community, has completed the pan-European FIX integration from Fidessa’s OMS to Squawker. The deep systems integration will ensure that users of the Fidessa European Trading Platform (ETP) will be able to route Orders, IOIs and Advertised Trades to Squawker direct from their OMS, when the new block trading venue goes-live in the first quarter of 2013.

Chris Gregory, CEO, Squawker, comments: “Squawker matches trading counterparts, enabling them to build block volumes together, according to their different types of interests. Those interests can be expressed by users from their OMS using orders, IOIs and Advertised Trades. From day-one when Squawker goes-live, Fidessa’s ETP users will be able to access the liquidity on Squawker, in the same way that they can access all of the world’s other major trading venues.”

Gregory continues: “The challenge of finding block interest needs to be resolved and we are seeing significant appetite to Squawker playing a key role in solving this challenge. Fidessa has now completed the Fidessa ETP FIX connectivity and deep integration with Squawker which will enable its clients to have easy access to this new source of liquidity. The deep integration will allow ETP users to automate this process even further by easily configuring their Fidessa OMS to automatically route IOIs to Squawker the instant they receive a block order onto their OMS blotter.”

Squawker is in discussions with the full range of sell-side firms, including investment banks, market makers, agency brokers, proprietary and principal trading firms.

Squawker® and SIX Financial Information Form Partnership

Squawker Participants to Execute pan-European Block Trades Always at Consolidated Mid-Price and Consolidated VWAP

London (UK) – Monday 21 January 2013 – Squawker®, the negotiation venue for sell-side block trading, and SIX Financial Information, today announced the signing of a new partnership. According to the agreement, SIX Financial Information will supply Squawker with real-time, pan-European market data via its flagship product Market Data Feed (MDF) allowing Squawker participants to execute pan-European block trades always at consolidated mid-price and consolidated VWAP. The announcement, which comes shortly after news of Squawker’s addition to the BT Radianz Cloud, underlines the new venue’s commitment to building solid relationships with robust, quality and trusted financial services providers.

From the venue’s go-live, scheduled for March 2013, Squawker will use SIX Financial Information’s pan-European data to populate its entire suite of instrument masters. Real-time data will enable Squawker to calculate consolidated mid-price and end-of-day consolidated VWAP prices. It will drive fat-finger checks and deliver data relating to exchange open/closing changes, as well as trading halts and resumptions information.

Christopher Gregory, co-founder and CEO, Squawker, comments: “Squawker’s collaboration with SIX Financial Information is crucial to the venue’s success. Using SIX Financial Information’s data via the Squawker platform, Squawker’s sell-side trading participants of mid-price interest will always execute at the consolidated mid-price of Europe’s national exchanges and major MTFs. Similarly, VWAP-interested participants will be able to agree a block trade at any point throughout the day that is guaranteed to execute at the day’s consolidated VWAP price.”

Martin Cole, Managing Director, SIX Financial Information UK Ltd, comments: “Squawker has the potential to redefine the way the market trades block sizes. No longer will firms need to slice up their large trade sizes and drip them slowly into the market over a period of time, risking impact cost or the unwanted attention from detrimental algorithmic flow. SIX Financial Information’s high quality and comprehensive coverage coupled with its real-time data availability delivers upon Squawker’s sell-side trading community data reliability requirements.”

MDF is a high performance, real-time global market data service delivering consolidated market information from exchanges, multilateral trading facilities (MTFs) and institutional contributors. MDF is particularly well suited for feeding applications which demand mid to high range data throughput.

Thinking out of the box – Best Execution

Chris Gregory, CEO and co-founder of Squawker explains how he modernised the art of sellside conversation.

Can you describe the Squawker offering?

It is a high touch neutral venue for pan-European trading but it is for the sellside only. In some senses it is like the traditional way of human negotiation but we have given it a modern look with a cloud application and social networking principles. It is not a dark pool but allows traders to find, negotiate and execute difficult blocks on an anonymous basis. This could range from a mid-cap desk trying to work a block trade in illiquid stocks to a block of highly liquid securities that might be impacted by algorithms and suffer from implementation shortfall. Traders have control over the entire trading process from liquidity discovery through to negotiation and trade execution.

The name Squawker comes from the ‘Squawk box’, an intercom speaker that used to be commonly used on trading floors for brokers, traders and analysts to communicate market events and information about block trades. We rolled the platform out in April and have so far been very pleased with the initial response in that over 70 sellside participants spread across 13 different European countries have joined. There has also been a good cross-section of styles from programme trading to baskets and transition management as well as different types of sellside firms. They range from the large Tier 1, global investment and European regional banks to smaller niche players that have a specific orientation.

Who is providing the ‘back office’?

BNP Paribas Security Services serves as the central settlement provider for all trades conducted on Squawker, and the platform has completed its integration with various vendor-provided systems such as Fidessa’s order management system, ULLINK and BT Radianz. While the larger institutions have proprietary implementations, the idea is that other sellside firms can utilise their existing connectivity to ease the on boarding process.

What were the drivers behind Squawker?

For such a long time the conversation had been about algos, direct market access and latency. However, if you look at where the trading was taking place, around 60% to 70% was going through the order books but that percentage was not growing. Whilst some trading was resting in dark pools and retail platforms there was still 10% to 15% of trading that was manually negotiated over the phone and Bloomberg chat. The other trend we noticed was that the buyside had very competitive solutions. They were able to source liquidity from many different providers. Also, if they were having trouble executing a block order in the order book then they were able to give that basket, programme or block trade to their broker. However, for the broker or investment bank, there was no central solution, utility or forum to interact against each other, particularly where they compete with each other. We spotted this gap and decided to provide a solution.

What about the pricing?

Squawker participants execute pan-European block trades at mid-price, guaranteed volume weighted average price (VWAP) or limit-price. Users commit to trade a minimum size (percentage of average daily volume) and then enter into private and anonymous person-to-person negotiation to build the block quantity. When the trade is completed, invites are sent to other users to continue trading. It is not complicated.

There are no algorithms?

That is correct. It is a very structured negotiation between two human beings. It is quite simple in that it is purely button driven. The software is highly intuitive and access is via a stand-alone graphical user interfaces (GUI) or a standard FIX connection, direct to the user’s existing order management systems. We also provide full electronic audit trails that can be loaded into compliance and performance measurement systems of the sellside firm.

What have been the major challenges with the roll-out?

They are the same with any project in the sense that it revolves around the realisation, delivery and co-ordination. We have been working to on-board customers and to create a critical mass and that is just hard work.

Future plans

We have just finished with the initial roll-out and all our focus is on growth and expanding the client base and trading activity. There are roughly 400 institutional sellside firms across Europe and of course we would like to on-board all of them. At the moment we are averaging around three new firms a week and we have around 20% of the market. Our goal is to have 100 signed on by December. London, which is the biggest financial market, as well as other Northern European markets have been among the first but we are also targeting the rest of Europe. It takes times and is relationship based. The goal is as we grow, our utility can add real value.

Looking at the bigger trends, what changes do you see in the industry in general?

Ironically the more things change, the more things stay the same in the sense that competition has always been relentless, as is the need to innovate. I think though that the conversation has moved on from being only about algos, DMA and speed to also remembering it’s about the quality of service that sellside firms now can provide their customers. Squawker is one of the tools to help the sellside provide the best service to their customers.

 

Trois nouvelles plateformes de transactions – L’Echo

Ce mercredi à Trade Tech, un panel a été consacré aux nouvelles plateformes de transactionsTrois nouveaux acteurs sont nés récemment pour venir encombrer davantage l’espace déjà bien complet des transactions en actions. Même si d’après leurs présidents, ces nouvelles plateformes s’avèrent différentes de ce qui existe déjà sur le marché.

Commençons d’abord par Aquis Exchange. Cette nouvelle plateforme doit être lancée cette année et est dirigée par Alasdair Haynes, l’ancien patron de Chi-X Europe. Il faut préciser que Haynes n’est pas à l’origine de la plus grande réussite des MTF depuis 2007. Ce titre revient à Tony McKay (sans oublier Peter Randall et Hirander Misra).

McKay est lui sur le point de lancer MarketBourse, la deuxième plateforme de transactions.

La troisème est Squawker, et se veut un dark pool “interactif”. Précisons que le marché européen compte déjà 24 dark pools, toutes différentes les unes des autres.

Aquis Exchange veut concurrence BATS Chi-X Europe avec un nouveau modèle de prix, comme Chi-X Europe l’avait fait en 2007 avec les marchés comme Euronext ou Deutsche Börse. Comme l’a expliqué Alasdair Haynes, Aquis ne chargera pas de coûts de manière pyramidale (où un gros trader paiera moins que les petites à cause du volume qu’il génère). La plateforme ne comptera des frais qu’au prorata de l’utilisation. Un peu comme une carte prépayée vendue par les opérateurs de télécoms. Très simple, selon lui.

MarketBourse se veut elle une plateforme de transactions sur toutes les classes d’actifs. Un vrai challenge, car dans un des autres panels de discussions, différents patrons de Bourse européenne ont rappelé qu’il est difficile pour ces entités de se spécialiser dans différentes classes d’actifs. Un exemple? La négociation des obligations d’Etat et d’entreprises.  Le Forex (les devises) est un autre exemple. Mas la nouvelle régulation des marchés pourrait changer la donne.

Enfin, Squawker se veut une dark pool où les ordres ne sont pas exécutés, mais où les intervenants de marché peuvent entrer en interaction les uns avec les autres de manière cachée pour trouver leur contrepartie.

En marge de ce panel, plusieurs personnes m’ont fait part de leur scepticisme quant à ces nouveaux venus.

Le challenge pour ceux-ci est de créer de la nouvelle liquidité, comme Chi-X Europe y était parvenu depuis 2007 grâce à l’appui d’un HFT venu des Etats-Unis: Getco. Sans cette nouvelle liquidité, ces nouveaux venus vont devoir concurrencer des noms déjà bien établis dans le secteur.

Il ne faut pas oublier qu’en 2006, à Trade Tech, l’annonce d’une nouvelle plateforme de transactions avait peu enthousiasmé les foules. Le nom de celle-ci? Chi-X Europe. “Personne n’aurait misé sur nous au départ” rappelle un des anciens de cette plateforme.

A suivre, donc. En particulier MarketBourse.

 

Intelligent Design for Institutional Technology, Waters Technology

New technologies aiming to solve problems, rather than paper them over, are a refreshing change of pace.

I don’t think anyone can realistically say that we, and by ‘we’, I mean the world at large, are safely out of the woods yet when it comes to the financial crisis. From an industry perspective, diminished activity in equities is still hurting firms across the market spectrum, commission-only traders are struggling, and even healthy companies are reporting flat financials.

There’s no shortage of companies out there with The Next Big Thing, of course, even if the relatively sparse footfall and low stand count (plus the abridged size) of TradeTech Europe this year gave a stark reminder that most are having tough times. Compliance vendors are having, on the whole, a great time, though, and the apparent solution of throwing everything possible at spot FX, on the part of platform developers, must be paying dividends somewhere. Even if (mostly) everyone agrees that there are just too many platforms. By ‘everyone’, I mean everyone apart from those developing the platforms, of course.

Reaction
Technology has always been designed to fill a need, ever since ancient man realized that it was a lot easier to kill a lot more people if the rock was sharp and had a handle. Over the past few years, though, it’s felt at times as if firms were fitting around technology, rather than the other way around. It’s alarming, not just because of the spend incurred as a result, but also because we’ll eventually end up being used as batteries, farmed in vast fields by uncaring metal overlords, waiting to be rescued by Keanu Reeves, if that pattern of thought is followed to its conclusion.

Recently, though, there have been a few technologies that have identified a problem with the market and wrapped themselves around it, though. Tradition’s ParFX (formerly TraFXpure), for instance, aims to mitigate economic advantage from advanced technology through its platform, while Squawker aims to solve the problem of performing block trades in an order book. Initiatives such as that between Liquidnet and SIX Swiss Exchange provide innovative ways to connect liquidity, and cross-platform surveillance tools allow for the search of voice records by keyword.

Essentially, it’s a good trend. It encourages the intelligent use of technology, rather than having it simply because it’s there, and it whittles the wheat from the chaff, so to speak. As always, I’m interested to hear from anyone doing anything exciting and new with technology in the capital markets space.

Liquidity, not structure, key for Europe’s new alternative venues, Trade News

Adequate liquidity provision will be reign as the central issue for the growing number of new European equity venues, senior buy- and sell-side participants agreed at a panel discussion yesterday.

Three emerging equities venues present at the event – MarketBourse, Aquis Exchange and Squawker – all have differentiated structures and fees, but will face tough competition despite being welcomed by buy- and sell-side firms.

For the buy-side, represented by David Miller, senior dealer at Invesco Perpetual, and Neil Smith, senior equity dealer at State Street Global Advisors, the issue of liquidity remains far from easy to solve.

While not being direct participants in the venues, buy-siders Miller and Smith welcomed the opportunity to direct their brokers to interact with ‘custom’ liquidity suited to their specific requirements and preferences under the structures put forward by both Squawker and MarketBourse.

Meanwhile Ben Springett, head of electronic trading, Europe for agency-broker Instinet, said like most brokers confronted with declining commission rates and relatively low volumes, his firm would welcome the subscription pricing model offered as an industry revolution by Alasdair Haynes, CEO, Aquis Exchange. Taking a lead from other industries such as media and telecoms, Haynes postulated that subscription pricing would lead inexorably to more trading and hence narrower spreads and better execution for the benefit of all; an old argument perhaps, but still a good one in the current climate in the industry.

Choose your partners

Rather than focusing on price to grow liquidity, both Squawker and MarketBourse are betting that buy-side clients, nervous about information leakage and toxic liquidity, will back models that allow them to decide what kind of counterparties they want to trade with and instruct their brokers accordingly.

According to Christopher Gregory, CEO, Squawker, the new platform has 36 members live and a further 45 in the on-boarding process. Squawker facilitates ‘private anonymous conversations’ with qualified sell-side counterparties and uses FIX indications of interest to automate the process of identifying possible matches. “Matching counterparties rather than orders” was the way Gregory summed up Squawker’s USP.

This may sound more like a dating website than an organised trading facility, but the buy-side panellists were definitely supportive of the ideas and sentiments underlying it.

Meanwhile, Tony Mackay, CEO, MarketBourse, saw his company as an “exchange between broker dark pools”. The idea once again is to allow buy-side clients and their sell-side brokers to pick and choose the kind of counterparties that see their potential orders. Market Bourse is not as far forward in terms of implementation as Squawker, but again both buy-side and sell-side saw value in its proposition.

New exchanges set out their stalls at TradeTech, Banking Technology

The next generation of trading venues went head-to-head on the first day at TradeTech in London– each keen to present its model of how best to match buyers with sellers.

“This is all about liquidity,” said Alasdair Haynes, chief executive at Aquis Exchange. “In Europe we trade four or five times less value than the US, yet the population in Europe is larger and the GDP is the same. We need to grow the market. Changing the business model will allow for greater liquidity.”

Aquis is a pan-European trading venue that will use a subscription-based pricing model, which Haynes likens to a mobile telephone pricing package that charges users based on how much call time, text messages and data they use, or a TV package in which certain channels are included, based on what the user is willing to pay. Haynes argued that both television and mobile phone subscription models have seen significant growth in the last five years, despite the recession – and insisted that bringing an equivalent model to equities could help to prompt significant growth.

Other solutions include Christopher Gregory’s new sell-side negotiation venue, Squawker, which will provide a forum for brokers to interact anonymously with each other and trade large blocks of stock. Squawker will act essentially as a counterparty matching service, rather than matching actual orders, as traditional exchanges and MTFs have done.

“This is a discretionary service, in which participants express to us what they are interested in doing, and who they are willing to trade with,” he said. “Our model will provide clarity in an electronic environment and provide efficiencies. There is a gap in the market, because until now no venue has existed to bring the sell-side together to exchange blocks of stock efficiently.”

Meanwhile, former Chi-X Global founder Tony Mackay has established Market Bourse, a new trading venue that is based around the concept of social networking rules. On Market Bourse, participants will be able to specify who they want to trade with – and who they want to avoid. The venue is explicitly targeted at segments of the market, such as institutional investors, who feel disadvantaged by the current market infrastructure and may wish to avoid certain kinds of participant, such as high-frequency traders.

“We recognise that the market is made up of lots of different constituents,” said Mackay. “Over the last 10-15 years, hedge funds and HFTs have become much more active while exchanges have got rid of all the functionality. I perceive a change on the buy side. They are not happy with what’s going on. We are putting the power back on the buy-side. We are giving them choice about who they don’t want to interact with. If they don’t want to interact with HFT, they can do that and the broker is bound by that. On Market Bourse, users will flag who they want an order to interact with.”

Of the three new entrants, Squawker received the most praise from buy-side fellow panellists.

“Chris’ model is interesting,” said David Miller, head of trading at Invesco Perpetual. “If I choose a broker to trade a big block, Chris’ model will enable the broker I’ve chosen to find the other side. His model is the one that has immediate value for us. It’s about moving blocks from a buyer to a seller as efficiently as possible.”

Neil Smith, senior equity dealer, Europe at State Street Global Advisors, added that his firm typically finds the greatest difficulty in trading small and mid-cap stocks – a situation that has worsened as overall levels of liquidity in equity markets have declined.

“With the market liquidity dropping, it’s become really difficult moving those stocks around,” he said. “That’s where Squawker could add some real value to the buy side. However, my concern for the Squawker model is you’d need a lot of data to start your business. From the buy side, we are very cautious about the way we interact with new ideas. I hope Chris succeeds quickly, because I think he needs to.”

Squawker opened earlier this month; Aquis Exchange plans to open later this year, subject to regulatory approval.

Charting a Return to Block Trading – The Trade News

Greater liquidity fragmentation and the rise of algo trading have fuelled a greater need for specialised block trading solutions, according to Christopher Gregory, co-founder and CEO of sell-side block trading system Squawker.

Squawker will have a staggered launch throughout April and according to Gregory, the growing difficulty to execute in size fuelled its development, as market participants continue to carve up large orders to interact on exchanges and multilateral trading facilities (MTFs).

“Squawker was born out of the fact that machine driven trading of all varieties – high frequency trading, algo or quant trading – is diverging from human driven trading and it’s no longer safe for a human to interact manually on electronic order books,” Gregory said.

The market infrastructure veteran cites the sustained drop in average trade size on the London Stock Exchange in recent years, which continues to decrease around 3% each month, as evidence that order books have become very mature and offer only shallow, fast-moving liquidity. 

While buy-side firms have a number of options for executing block trades, including venues such as Liquidnet and broker dark pools, sell-side firms have no independent mechanism to trade blocks against each other, asserts Gregory.

“Sell-side participants will be invited to join Squawker because unlike the buy-side, they have no solution to trading blocks amongst each other. As sell-side firms collect order flow from their buy-side customers, liquidity is concentrated on a smaller number of firms on the sell-side than on the buy-side, improving the chance of finding a match between firms in the same pool,” Gregory said.

However, the core idea behind Squawker – which hopes to on-board 70-100 sell-side counterparts in April – is not to offer execution, but a basis for two sell-side counterparts to negotiate a block trade anonymously, which is then executed bilaterally.

The platform collects trading interest from counterparties and suggests matches for orders based on the trade information, trading history and profile of they way different firms behave in the system.

Gregory sees this structure as the converging of person-to-person trading and electronic straight-through-processing, as negotiations will generate a FIX message that can be read by order management systems, compliance infrastructure and yield trade performance data.

The venue announced it has selected BNP Paribas Securities Services as its pan-European central settlement provider, while its infrastructure will be hosted by trading technology provider BT Radianz. 

As execution does not take place on the system, Squawker will not be classed as an MTF, but will have to navigate impending changes to European regulation under MiFID II, which is expected to be implemented in 2015.

“Squawker is a discretionary system and no trades execute automatically, unlike a block match or order book, so it is not be classed as an MTF. Right now, under MiFID, Squawker is regulated as a broker and depending on final rules, may be classed as an organised trading facility under MiFID II,” he said.