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Are Institutions in the Dark About Anti-Gaming?

Aug 14, 2008 @ 11:55 AM By Ivy Schmerken,

Every major broker dealer says it has the best anti-gaming technology to prevent information leakage in dark pools. However, institutional traders I spoke to recently seemed skeptical of whether sell-side firms would police their dark liquidity pools,suggesting that the independent firms (ITG, Liquidnet and Pipeline) were more likely to expel participants that were sniffing out institutional orders or trying to manipulate prices.

Career Opportunities Emerge Out of the Credit Crisis

Aug 5, 2008 @ 05:25 PM By Ivy Schmerken,

While the credit crisis has meant bad news for traders on the job front, some capital markets firms actually see this as an opportunity to expand into new areas of equity trading and risk management. Take Pali Capital, the U.S. broker- dealer subsidiary of Pali Holdings Inc., recently lifted a portfolio trading and risk management team from CIBC World Markets to expand its offerings in equities and execution.

The Buy-Side Values Short-Trade Ideas

Jul 30, 2008 @ 12:52 PM By Ivy Schmerken,

When the Securities and Exchange Commission posted an order last night extending the temporary restrictions it placed on short selling in 19 financial stocks until Aug. 12, 2008, the SEC may have allayed the concerns of asset managers that rely upon short-trade ideas in their strategies.

Why is the Buy-Side Silent on CCAs?

Jul 21, 2008 @ 02:53 PM By Ivy Schmerken,

I wrote a story about the buy-side expanding the CCAs from U.S. equities to execute in international equities and across multiple asset classes. The story is getting some traction. Integrity Research summarized the story in its blog, “CCAs for Fixed Income.”

NYSE Says Good Bye to Specialists; Hello DMMs

Jun 19, 2008 @ 12:37 PM By Ivy Schmerken,

Change is brewing again at the New York Stock Exchange. Last Friday, the exchange proposed rules that would eliminate the traditional function of a specialist and replace them with designated market makers or DMMs. Is this a good move? How will it impact the Hybrid Market?

CBOE and 3-D Markets Bring the GWAP to Options

Jun 2, 2008 @ 06:36 PM By Ivy Schmerken,

The idea of creating a dark pool in options has not been easy because options trades are not permitted to occur off-exchange. But a recent deal between the Chicago Board Options Exchange and 3-D Markets, a block-crossing network, suggests that exchanges and liquidity pools can cooperate on crossing institutional orders based on benchmark prices.

Is Open Source Threatening the Status Quo?

May 20, 2008 @ 02:01 PM By Ivy Schmerken,

A new software upstart Marketcetera contends that its open source platform for building automated trading systems is an alternative to the likes of EMS providers Portware and Flextrade. Marketcetera's CEO Graham Miller (who previously worked at hedge funds where he developed automated trading systems) regards these platforms as proprietary and calls them restrictive and inflexible as well as expensive.

Equity Markets Play the Rebate Game to Win Market Share

May 6, 2008 @ 02:35 PM By Ivy Schmerken,

It's getting hard to keep up with the changes in fee structures emanating from U.S. stock exchanges and ECNs. Equity market players are changing their transaction prices left and right, offering higher rebates to liquidity providers or lower take-fees to those firms that remove liquidity.

Time to End Wall Street IT's Boom and Bust Cycle?

Apr 14, 2008 @ 12:59 PM By Ivy Schmerken,

With investment banks reporting layoffs and tightening their belts in light of the economic downturn, one of the major themes emerging in IT circles is sustainable cost reduction. “The industry does carry a lot of cost,” says Bob Gach, global managing director capital markets at Accenture in New York. “The industry hasn’t had the courage or need to attack these costs,” says Gach.

Treasury's Plan for Regulatory Overhaul Annoints the Fed As Wall Street's Supercop

Apr 8, 2008 @ 01:49 PM By Ivy Schmerken,

As Treasury Secretary Henry Paulson’s plan to overhaul financial market regulation makes its way through Washington, the question is how could this impact broker dealers, asset managers and hedge funds. Would there be less regulation for the sake of global competitiveness as some opponents contend? And which entity would oversee the opaque world of OTC derivatives?

Are Exchanges Converging with Dark Pools?

Mar 20, 2008 @ 02:16 PM By Ivy Schmerken,

The lines between exchanges and dark liquidity pools are blurring. Last week NYSE Euronext announced that clients of NYSE Arca’s electronic trading system would have access to non-displayed liquidity pools through participating broker-dealers and alternative trading systems.

ATSs Favor Independent Tech Supplier

Nov 26, 2007 @ 03:00 PM By Ivy Schmerken,

New alternative marketplaces that are gearing up to compete with traditional exchanges are staying clear of the exchange-aligned technology solution providers. In late October, Turquoise, the consortium led by seven investments banks to build an alternative trading system to the London Stock Exchange and other traditional European exchanges, chose Stockholm-based Cinnober Financial Technology AB to build its matching engine.

Exchange Consolidation Raises Issues for Staying on Rival's Technology Platform

Nov 26, 2007 @ 11:28 AM By Ivy Schmerken,

Everyone’s talking about the wave of global exchange consolidation, but what about the exchanges that end up running on a competitor’s technology platform? It’s interesting to consider whether exchanges that run on a trading platform that gets acquired will try to ditch the technology once it’s owned by another exchange competitor.

SIFMA Fixed Income Conference Highlights Risk Management

Nov 19, 2007 @ 05:04 PM By Ivy Schmerken,

Given the credit market turmoil causing top firms to report multi-billion dollar losses, it’s not surprising that risk management was a major theme at the SIFMA Fixed Income Technology and e-Trading Conference last Thursday in New York. “Risk is much more important and front and center in our minds,” said Dexter Senft, managing director at Lehman Brothers, in his introductory remarks to the conference.

Trading Bonuses: What Can You Expect To Bring Home This Year?

Sep 26, 2007 @ 01:43 PM By Ivy Schmerken,

With the credit crisis battering fixed-income desks and quantitative hedge funds, Wall Street traders are going to see their bonuses shrink in 2007 as firms recover from the turmoil in sub-prime mortgages and position their desks for 2008.

Boston Equities Exchange (Bex) Shutters Operations

Sep 5, 2007 @ 02:22 PM By Ivy Schmerken,

The Boston Equities Exchange, an automated trading facility is shuttering its trading operations today, according to an announcement by the Boston Stock Exchange(BSE). The news came suddenly and suggests there could be a shakeout among the e-trading ventures formed to compete under Regulation NMS.

Bear CDO Series: Management Overhaul: Questions on Risk Management

Aug 8, 2007 @ 03:51 PM By Ivy Schmerken,

The blame game is not over. This week, Bear Stearns ousted one of its senior executives, Warren Spector, under whose watch the firm brought out two leverage hedge funds exposed to the shady sub-prime market. To calm the jittery markets over uncertainty that other credit problems were lurking, the firm promoted Alan Schwartz, a relationship-oriented investment banker, as sole president.

Bear CDO Series: A Credit Crisis and More Bloodletting Hits Hedge Funds

Aug 3, 2007 @ 05:35 PM By Ivy Schmerken,

The credit crisis that has been rocking the stock market continues to ripple through the economy and spread beyond sub-prime mortgages to broader sectors of the housing market and other financial institutions and hedge funds. Whether this is overblown or not, we awoke this morning to learn about the closing of American Home Mortgage (AHM) Investment from Melville, Long Island, a lender to the sub-prime mortgage market. On Monday, we heard about Sowood Capital Management, the Boston-based hedge fund, deciding to sell its portfolio containing leveraged positions in bonds and derivatives at fire sale prices to Citadel Investment Group.

BATS Reacts to Changes at Direct Edge

Jul 19, 2007 @ 11:07 AM By Ivy Schmerken,

BATS Trading had a reaction to yesterday's blog that Citadel Derivatives is investing in Direct Edge ECN and that its parent Knight Capital is seeking to build a consortium of direct investors to grow the ECN's liquidity and might eventually consider exchange status. Even though Direct Edge appears to be taking a page from BATS' own strategy, here's what BATS Trading VP, Randy Williams, had to say:

Knight Capital Lands Citadel Derivatives as Direct Investor in Direct Edge ECN, Seeks to Grow Consortium

Jul 18, 2007 @ 03:02 PM By Ivy Schmerken,

Citadel Derivatives Group is making a minority investment in Direct Edge ECN, signaling a change in strategy for parent Knight Capital Group, which is now looking to attract a consortium of direct investors to grow the ECN's volume to the next level.

According to today's announcement, Citadel Derivatives, an affiliate of Citadel Investment Group, LLC, the alternative asset manager, which is a leading equity market maker in its own right, has agreed to purchase a minority stake in Direct Edge ECN.

CME-CBOT Merger Sparks More Takeover Talk

Jul 13, 2007 @ 04:32 PM By Ivy Schmerken,

Now that the $11.3 billion merger between the Chicago Mercantile Exchange (CME) and CBOT Holdings is a done deal, industry sources are speculating about the CME Group’s next acquisition. And while the Intercontinental Exchange raised its profile during the bidding battle, it missed out on the CBOT, and now it may need to merge with another exchange operator that wants to expand its derivatives business. Given the reality that consolidation of exchanges is moving like a tornado on steroids, it’s logical that the new combined company, CME Group, a CME/CBOT company, would be considering its next target. “Once they digest this merger, it would not surprise me if they go after another acquisition,” comments Michael Henry, senior executive in Accenture’s Capital Markets Practice who believes that it should be an international exchange.

The Buy-Side Rates JPMorgan and Lehman as Top U.S. Fixed Income Dealers

Jul 10, 2007 @ 10:33 PM By Ivy Schmerken,

JP Morgan and Lehman Brothers are the leading dealers with the highest market shares in U.S. fixed-income trading across products, according to a survey by Greenwich Associates, the financial services research and consulting firm headquartered in Greenwich, Conn. released on Monday. Both dealers also have the top rating by institutional investors for delivering the best service qualify across fixed-income sales, research and trading.

Reg NMS Test Set for Saturday, June 30th

Jun 27, 2007 @ 03:30 PM By Ivy Schmerken,

An industry-wide test will be conducted for Regulation NMS on Saturday, June 30. Brokers that participate can test their Reg NMS compliant trading systems with all the automated trading centers. When the Pilot Stocks Phase starts on July 9th all the broker dealers will have to be in compliance with Reg NMS for 249 stocks.

Morgan Stanley Ranks First in Financial Insights Survey of Electronic Trading Services

Jun 21, 2007 @ 05:04 PM By Ivy Schmerken,

Morgan Stanley won first place among a dozen bulge bracket brokers ranked for providing electronic trading services to buy-side clients, according to the Financial Insights 2007 Electronic Trading Services Ranking which was released at the SIFMA Conference today.

Brokers were evaluated in five categories: direct market access (DMA), algorithmic trading, transaction cost analysis (TCA), dark pool access and execution management system (EMS).

Nasdaq Updates Strategy with Crossing Networks, Options and Other Value-Added Services

Jun 14, 2007 @ 04:54 PM By Ivy Schmerken,

While continuing to increase its market share in U.S. equities, The Nasdaq Stock Market is focused on adding valued-added products to its INET matching engine, according to a press briefing held today.

After the purchasing the INET matching engine for $900 million from Instinet in December of 2005, and merging the BRUT ECN and Nasdaq’s own SuperMontage matching engine into INET, the U.S.-based electronic stock exchange is leveraging the INET technology to launch intraday and continuous block crossing networks and an options exchange.

Q-WIXX Launch Caters to List Traders of Credit Default Swaps

Jun 12, 2007 @ 04:55 PM By Ivy Schmerken,

With investment managers and hedge funds trading long lists of single-name credit default swaps (CDSs), last week’s launch of Q-WIXX, an electronic platform, is gaining traction among the dealers and bringing more efficiency to the auction process.

Q-WIXX is set up to help dealers, correlation desks, prop desks, hedge funds and other buy-side market participants execute transactions known as Offers Wanted in Competition (OWICs) or Bids Wanted in Competition (BWICs).

ITG Hires Rodriguez to Focus on Global Algorithms

Jun 5, 2007 @ 06:49 PM By Ivy Schmerken,

George Rodriguez has joined Investment Technology Group (ITG) in New York as director of global algorithmic sales. Rodriguez will be working in ITG’s algorithmic sales group with a focus on selling the firm’s suite of international algorithms to it’s U.S. customer base, according to Tony Huck, managing director of ITG.

Rodriguez left a senior position at TradeTrek Securities, an institutional agency broker specializing in algorithmic trading, two weeks ago. He previously worked for Guzman & Company and the New York Stock Exchange.

Trading Private Paper: Are New Dark Pools On the Horizon?

May 29, 2007 @ 11:17 AM By Ivy Schmerken,

Given the buy-side's interest in finding liquidity under the radar, here's a new twist on 'dark pools..'

On Friday the Wall Street Journal reported that Goldman Sachs is creating its own private system to trade the stocks of companies that want to avoid the glare of U.S. regulation. The new system —GS TRuE— short for Goldman Sachs Tradable Unregistered Equity, made its debut last week with the sale of a 15 percent stake in Oaktree Capital Management LLC, an alternative asset manager.

New Independent Research Platform Targets Buy Side

May 23, 2007 @ 10:54 AM By Ivy Schmerken,

With the buy-side increasingly looking to separate trading decisions from where it purchases research, a new platform offering independent research is marketing analysts directly to the buy-side.

New York-based StreetBrains, LLC is launching a third-party platform focusing on equity, alternative, derivatives and fixed income research analysts. “We’ve essentially cut out the middlemen,” says Lawrence Margolis, a founder and managing director at StreetBrains in New York. The public Web site went live on Tuesday afternoon.

CME Raises Bid for CBOT, But will ICE Prevail Given Regulatory Concerns?

May 16, 2007 @ 03:10 PM By Ivy Schmerken,

With the Chicago Mercantile Exchange (CME) raising its bid to acquire the Chicago Board of Trade (CBOT) last week to break the Intercontinental’s Exchange’s chances of winning the bidding war, there is speculation as to whether the upstart electronic energy market and soft commodity exchange will up the ante, or allow the CME to prevail.
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Last Friday, the CME raised its offer by 16 percent from $7.9 billion to $9.2 billion, which is still below the ICE deal, which is valued at $10 billion.

Rodriguez Leaves TradeTrek Securities

May 16, 2007 @ 01:28 PM By Ivy Schmerken,

George Rodriguez, a managing director at TradeTrek Securities LLC responsible for sales, left his position at the institutional brokerage firm last week.

Rodriguez, who was responsible for sales to traditional investment advisers and pension sponsors, left over a disagreement on the direction of the firm, according to Fred Graboyes, president of TradeTrek who is managing partner and runs the firm based in Newark, NJ. TradeTrek is an agency-only brokerage firm that specializes in quantitative execution services for institutional investors, offering algorithmic trading, pre-and post-trade analysis.

Maxim Group Steps into Algorithmic Space via Fidessa BlueBox

May 9, 2007 @ 01:44 PM By Ivy Schmerken,

Moving into the algorithmic trading space while retaining control over its order flow, New York-based Maxim Group LLC, has gone live with Fidessa BlueBox, a suite of algorithmic trading strategies from Fidessa Group.

Maxim Group has been a sell-side client of Fidessa’s order management system since March of 2006 in offering OTC and listed trading to their clients, according to Martin Hakker, EVP marketing at Fidessa.

Canadian Brokers Band Together to Form Alpha ATS

May 7, 2007 @ 10:27 AM By Ivy Schmerken,

With alternative trading systems (ATS) proliferating around the world, seven of Canada’s largest investment dealers are planning to establish a new ATS that will pool their internal flows and increase the country’s equity trading efficiencies, the group announced on Thursday.

“With these seven broker dealers banding together to launch a single ATS for internalization, it’s going to make broker internalization in Canada more efficient than ever,” says Jackie Chung, president, Competitive Metrics Inc., a strategic research and advisory firm focusing on the Canadian financial industry.

Dark Pools Shine the Light on Record Volumes

May 2, 2007 @ 02:59 PM By Ivy Schmerken,

Dark books have gained notoriety in the media for anonymously crossing stock trades in non-displayed pools of liquidity, but now they are shining some light on their results as they achieve record volumes.

Today, NYFIX Millennium LLC, said it achieved a single-day record when more than 80 million shares matched in its Millennium alternative trading system (ATS). NYFIX reported that trades were matched in over 2,000 individual symbols.

Fidessa's Acquisition of Latent Zero Means Synergies for Buy and Sell Side

Apr 16, 2007 @ 08:05 PM By Ivy Schmerken,

With more multi-asset trading on the horizon and buy-side firms clamoring for streamlined integration of OMSs and EMSs, London-based royalblue group, the company behind Fidessa, has agreed to acquire LatentZero, a provider of buy-side order management systems, for $125 million.

According to Fidessa CEO Mark Ames, the reason for the acquisition is that “ LatentZero offered us a unique opportunity at a tangible level. They are very focused on the buy-side as we are on the sell –side.” Citing their whole culture, technology development and philosophy, “Strategically, it had all the right signs,” he says.

Interactive Brokers Reports Trading Contest Results

Apr 11, 2007 @ 02:09 PM By Ivy Schmerken,

Interactive Brokers (IB) reported the results of its 2007 Collegiate Trading Olympiad with the top three winners creating automated trading programs utilizing different strategies with stocks and options and futures.

Brian Eckerly, 22, who won first place, received $100,000 in prize money. Eckerly recently graduated from Ohio State University with a degree in electrical and computer engineering. Eckerly traded a mix of stocks and options, using S&P 500 ETFs and the options on that, earning a profit of $294,190.

ING Investment Management Refreshes Trading Turrets

Apr 10, 2007 @ 04:37 PM By Ivy Schmerken,

ING Investment Management Americas upgraded its buy-side trading floor in New York City recently, deploying IPC’s IQ/MAX trading turret there and in Hartford, Conn. The 10-person trading floor, located at 230 Park Ave. in New York, made the move to the newest version of the turret last November. In addition, the firm installed the new turret for a single individual trader located in Hartford, Conn.

Test Finds Infrastructure Eliminates Latency Spikes

Mar 28, 2007 @ 07:17 PM By Ivy Schmerken,

With market data message rates skyrocketing, Wall Street firms are worried about data latency affecting the behavior of their algorithms. One cool technology that is getting some attention comes from the networking side where market data platforms have traditionally used Ethernet. On March 20, Securities Technology Analysis Center (STAC) published a report examining the performance of the latest software from Wombat Financial Software running on the Cisco SFS InfiniBand solution.

The test was conducted on servers using Linux on AMD Operteron Processors. Although the test was financed by Cisco, "Paying for a test does not equate with influencing the test and results or getting good results," says a Cisco spokesperson. "STAC ensures that the tests they do are neutral and fair in every way," adds the spokesperson.

STAC discovered that the combination of these technologies eliminated nearly two-thirds of the mean latency experienced by the Ethernet network, which is the network medium on which most clients run their market data systems.

The Buy Side Should Get Equal Access to Low-Latency Executions

Mar 21, 2007 @ 02:28 PM By Ivy Schmerken,

There is so much focus on low-latency these days, but this has not been so much of a concern for the buy side. This is understandable because most buy-side firms use algorithms hosted by the sell-side, and most of the so-called low latency services coming out are targeted at broker dealers and hedge funds.

But perhaps the buy-side should pay attention to make sure there is a level playing field.
Buy-side firms that are executing trades through broker-sponsored algorithmic trading strategies should make sure they are getting equal treatment with the hedge funds customers when it comes to low-latency access to execution venues.

BNY ConvergEx Turns on Block Crossing Network

Mar 7, 2007 @ 06:59 PM By Ivy Schmerken,

In a sign that dark pools of liquidity are continuing to proliferate, on Tuesday BNY ConvergEx Group LLC launched ConvergEx Cross, a new block crossing service that matches orders and is open to buy- and sell-side firms.

The proprietary crossing network combines the natural liquidity of the BNY agency brokerage business with the technology of Eze Castle, the buy-side order management system it merged with in October of 2006. It took only four months for ConvergEx to put together the crossing network, which has been registered as an alternative trading system (ATS) and went into production beta testing on Feb. 6 before going live on March 6.

NYSE Asks SEC for Relief from Routing to ADF

Mar 2, 2007 @ 04:15 PM By Ivy Schmerken,

The New York Stock Exchange (NYSE) asked the Securities and Exchange Commission (SEC) for relief from the trade-through rule because it cannot route orders to certain alternative trading systems and the International Stock Exchange that display their quotes on the NASD Alternative Display Facility. The NYSE is requesting relief for a 30-day period, from March 5 until April 5.

Reading between the lines, this means the NYSE is not fully compliant with Reg NMS and is asking the SEC for "a limited no-action" allowing the exchange to trade-through the protected quotes of NASD ADF participants for one month, beginning Monday, March 5th until April 5th.

BATS Trading Mulls Over European Expansion

Mar 1, 2007 @ 01:47 PM By Ivy Schmerken,

BATS Trading, the Kansas City-based ECN, is contemplating an expansion into the European equities market, said Dave Cummings, CEO of BATS Trading, in Monday’s e-mail to his subscribers.

After lying on a beach in Mexico last week reading “The World is Flat” by Thomas Friedman, Cummings was inspired by the book to think about globalization effects and the worldwide free flow of information via the Internet. So he decided to ask his readers – there are 1,500 people on his e-mail list – what they think about BATS expanding into Europe.

UNX Provides Access to Liquidity Sweeping Tools Via Instant Messaging

Feb 16, 2007 @ 02:15 PM By Ivy Schmerken,

Last week, IM TRADER, the instant messaging network for brokers and fund managers, began allowing institutions to sweep electronic pools for hidden and visible liquidity by integrating its network with UNX’s algorithmic technology.

“We’ve helped integrate their algorithmic system out over the IMTRADER network to help investment professionals have the ability to communicate orders to a sophisticated platform using an AOL Instant Messenger window,” explains Ed McDonnell, Pivot Solutions’ SVP of Sales. There’s no new technology involved and no change in current workflow for the buy-side trader.

ITG POSIT Targets MiFID and Others Follow Suit

Feb 8, 2007 @ 05:02 PM By Ivy Schmerken,

Ivy Schmerken, Advanced Trading

Crossing networks are staking out their turf in trading Pan European equities as a prelude to competing with traditional exchanges under the Markets In Financial Instruments Directive or MiFID.

This week, Investment Technology Group (ITG) said it plans to launch POSIT Now, a continuous intraday crossing system for equities — into Europe. POSIT was the first regulated ATS in Europe but as of November, it will become a multilateral trading facility or MTF under MiFID.

Credit Suisse AES Integrates with TradingScreen for Listed Futures

Jan 18, 2007 @ 01:24 PM By Ivy Schmerken,

With buy-side firms ready to extend electronic trading in equities over to multiple asset classes, Credit Suisse AES (Advanced Execution Strategies) is expanding its algorithmic trading products into listed futures.

This week, Trading Screen, the operator of a multi-product trading platform, announced that Credit Suisse AES (Advanced Execution Strategies) for the listed futures markets have been integrated into TradingScreen’s full suite of trading products.

James Leman Joins Westwater Corp.

Jan 11, 2007 @ 01:12 PM By Ivy Schmerken,

James Leman, an industry veteran who brings 20-plus years of expertise in electronic trading as well as middle and back-office technology strategies, has joined Westwater Corp. as managing director and head of its Capital Markets Practice.

OptionsHouse Goes Lives with Online Trading Site

Jan 10, 2007 @ 04:58 PM By Ivy Schmerken,

OptionsHouse, a new discount brokerage firm launched its online Web site on Monday offering stock and options trading at a simple, flat-fee rate to retail investors and institutions.

Creditex Spins Off Q-WIXX Execution Service for Large Credit Derivatives Portfolios

Dec 20, 2006 @ 04:44 PM By Ivy Schmerken,

Creditex Group is spinning off a new electronic platform, Q-WIXX Inc., for trading large credit derivatives portfolio. The automated execution service conducted its first beta trade for a portfolio valued at $1 billion (500 million euros) consisting of 131 North American and European credit derivatives names.

R.G. Niederhoffer Capital Management (New York)
Roy Niederhoffer
President and Founder

You have to rotate your models more rapidly today than you used to. Models that used to work have stopped working with greater rapidity lately. I think that this probably represents the entrance of a large number of players into the hedge fund space in ... More >>