Squawker is a sell-side to sell-side block trading venue that is based on social networking principles, in which participants can choose which counterparties they wish to expose their orders to. The idea is to encourage sell-side firms to post large blocks of liquidity, without the risk of causing excessive market impact.
Under the deal, BT Radianz, which operates a financial extranet, will handle connectivity to Squawker through its cloud technology. The advantages of cloud technology are its relatively low cost and high scalability; the main disadvantage is that large financial institutions have previously expressed concerns over its security. However, with the rise of companies such as Amazon Web Services, which recently concluded a high profile with Nasdaq OMX, the technology is gradually becoming more accepted in financial services.
“By collaborating with BT, we are able to ensure the highest quality trading venue for our global clients, with easy access to our services via a proven, trusted provider that is well known among the sell-side,” said Christopher Gregory, co-founder and chief executive at Squawker. “Squawker will provide a new solution to the block trading challenge that the industry has been grappling with for a while.”
As a discretionary platform, Squawker will be different to other European trading venues such as the multilateral trading facilities, which are bound to offer free access under the upcoming MiFID II legislation being discussed in the European Parliament. Squawker matches participants based on price, volume and time; the final deal is then negotiated bilaterally.
The platform also claims to be free from computer-generated algorithms, which have become ubiquitous on most lit stock exchanges and trading venues. On Squawker, all trades will be made by human traders – a measure the platform says makes it the first ‘toxic-free’ trading venue. While alternatives such as dark pools and broker crossing networks exist for buy-side flow, Squawker aims to target sell-side flows, which it says have yet to find a suitable equivalent.
“The sell-side doesn’t have a way of finding their preferred counterparty,” said Gregory. “There are lots of solutions for the buy-side, but the sell-side has nowhere to go for a large order without showing its hand. We are here to change that.”