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MiFID II Transparency Puts Stress on Data Architecture

Buy-side firms are facing huge changes in disclosure and transparency requirements, which could upend their data management architectures, according to this guest commentary from FlexTrade.

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October 19, 2006

Tech Notes

By Staff Reports

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  • Tech Notes

Is it an EMS or an OMS? FutureTrade's recent deal with Liquidnet shines another spotlight on the growing convergence of front-end trading systems and order management systems. The development project adds FutureTrade's platform best known as a front-end trading (or execution management) system to the roster of order management systems accessible by Liquidnet's blotter-scrapping technology. FutureTrade has always offered some OMS functionality, according to Jim Kwiatkowski, a FutureTrade executive vice president in charge of sales and marketing. And last year, the vendor built a blotter into its system. A blotter is generally considered to be the heart of an OMS. It keeps track of orders and their executions and can be accessed by both portfolio managers and traders. Now, with its full-fledged blotter and large list of hedge fund clients, FutureTrade has won acceptance as an OMS by Liquidnet. "We have evolved a trading-only system into an order management system," Kwiatkowski says. "We are now a proper order management system as validated by our relationship with Liquidnet." The best-known mergers of OMSs and EMSs are represented by Macgregor/ITG and the Eze Castle/BNY Brokerage deals. -Peter Chapman

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*JP Morgan Releases Algos for Dark Liquidity

JP Morgan, reacting to the growing prevalence of blind crossing networks, is tinkering with its family of algorithms. The big broker recently upgraded its standard implementation shortfall algorithm and introduced two new ones to take advantage of trading opportunities in the so-called "dark pools." Implementation shortfall algorithms seek to fill a trader's order at a price as close as possible to the price of the stock when the trader got the order. As dark pools, or crossing networks in which prices and sizes are not disclosed, grow in number and popularity, brokers are developing algorithms to trade within them. Morgan put the emphasis on its implementation shortfall algos first, but will eventually re-engineer most of its other algos too, according to Carl Carrie, head of product development in Morgan's electronic client solutions group. Morgan's new and revamped algos will now look for liquidity in eight pools: Posit, Pipeline, Millennium, Liquidnet H2O, ISE MidPointMatch, Nasdaq Cross, Lava PI and Instinet IDX. Its two new algos are called Aqua and Arid. Aqua is meant for trading very liquid stocks. Arid is to be used for less liquid names such as small caps. Arid is meant almost exclusively for use in dark pools, but will access displayed marketplaces stealthily, according to Carrie. "It rarely ever posts," he notes. Both algos incorporate other "anti-gaming" properties that allow them to discover evidence of price manipulation and react accordingly, Carrie says.